Hastings Group Holdings PLC (LON:HSTG) directors have agreed a deal for the insurer to be taken over for £1.66bn cash.
A consortium of Finnish insurer Sampo Oyj and South Africa's Rand Merchant Investment (RMI), which already owns a 29.7% stake in the company, have offering 250p per share in cash, a 16% premium above yesterday’s close price and 47% above the price on 28 July before talks were revealed, but lower than levels seen in early 2018.
Investors will also be entitled to a 4.5p interim dividend declared by the FTSE 250-listed general insurer as it reported a first-half profit before tax of £63.5mln, up 37% on a year ago.
The Hastings board’s independent directors said they intend to recommend unanimously that shareholders vote in favour of the deal.
One of Hastings' non-executive directors is Herman Bosman, chief executive of RMI, and so was said to have not participated in the consideration of the offer.
Hastings chairman Thomas Colraine said the cash offer “represents a very attractive proposition”, with the premium above the recent price “in line with our focus of generating value for shareholders and reflects the quality of our business”.
Shares in the company jumped 18% to 253.1p on Wednesday morning.
Analysts at UBS said they believe Hastings "would be better suited to this proposed ownership structure" as the outlook for UK motor insurers is challenging.
"For Hastings to execute on its long term market share growth ambitions, we likely need a period of hard UK motor pricing where customer churn increases. We find that unlikely near term. Should the UK motor pricing cycle remain depressed, we see logic in Hastings finding 'parental support' in a larger balance sheet.
"We believe a bolstered balance sheet behind Hastings can help mitigate the cyclicality of the asset, and provide the capital injection when needed to take full advantage of any turn in the UK motor pricing cycle, whenever it comes."
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