Shares in motor insurer Hastings (HSTG) leapt 17.9% to 253.5p after the independent directors recommended a 250p per share bid from a consortium of Finnish insurer Sampo and South African investor RMI.
Hastings revealed on 29 July that it had been approached by the consortium regarding a potential cash offer. Between them Sampo and RMI already own or control 29.7% of the capital of Hastings.
In today’s announcement, the independent Hastings directors, who were advised by Barclays (BARC), Fenchurch Advisory Partners and Numis (NUM), describe the £1.66 billion offer for the company as ‘fair and reasonable’ and say they intend to recommend unanimously that shareholders accept it.
Investors who are on the Hastings share register as of 2 October will be entitled to the interim dividend of 4.5p per share on top of the 250p per share offer.
In explaining its reasons for the offer, Sampo says it believes the UK, ‘as the second largest property and casualty market in Europe, offers an attractive scale opportunity.’
The acquisition of Hastings allows the Finnish firm to expand its property and casualty business and ‘provides an attractively positioned platform in one of the most digitally advanced markets globally.’
The UK has high levels of digital distribution with three quarters of motor insurance policies sold through price comparison websites (PCWs).
According to Sampo, Hastings is ‘one of the leading distributors of motor insurance policies through PCWs in the UK with differentiated digital capabilities in technical and retail pricing, anti-fraud and customer service.’
RMI on the other hand is a long-term strategic investor in financial firms and owns the bulk (29%) of the stock held by the consortium, which it acquired at 248p per share back in 2017.
The UK motor insurance market is highly competitive and in recent years claim inflation has been a big issue. Taking Hastings private will enable it to ‘benefit from a more long term approach to decision making’ and ‘further develop its agile and digital business model to create long term value’ according to the bidders.