JOHANNESBURG - Rand Merchant Investment Holdings (RMI) yesterday announced it had formed a joint venture (JV) with its subsidiary OUTsurance and Nordic insurance group Sampo to acquire the remaining stake at UK auto insurance group Hastings Group Holdings for £1.66billion (R37.53bn).
RMI said the transaction would be housed in a new company, Dorset Bidco, that would be controlled by the group, OUTsurance and Sampo.
Chief executive Herman Bosman said the group decided on the transaction as a strategic long-term investment to target the home insurance market in the UK. He said RMI believed Hastings was able to show new business growth of 10percent and its current improving client retention rates could grow that market share beyond the current 7percent, saying Hastings had barely penetrated the UK home insurance market.
Bosman said Dorset would make a cash offer to acquire Hastings shares at 250pence each, while Hastings shareholders would also receive 4.5p interim dividend. The offer represented a 47.1percent premium to the closing price per Hastings share of 170p on July 28, the last business day before Hastings received an approach.
RMI and OUTsurance will then acquire a further 0.3percent interest in Hastings for £5.3million, taking their stake to 30percent, leaving Sampo with a 70percent shareholding.
RMI and OUTsurance would have an option to increase their stake up to 40percent within 18 months. “At the moment, we feel we have an influential seat at the table with Sampo,” said Bosman.
He said although they would not directly interfere in Hastings management, there were areas where RMI, OUTsurance and Sampo could add value to the business.
For example, previously OUTsurance and Hastings had shared best practice on aspects of their operations, such as Hastings entering into an offshore call centre arrangement with OUTsurance in 2018.
Sampo is listed on Nasdaq Helsinki with a e17.6bn (R358.75bn) market capitalisation. Its subsidiary If P&C Insurance is the leading property and casualty insurer in the Nordic region.
“Sampo believes the UK, as the second-largest retail P&C (property and casualty) market in Europe, offers an attractive scale opportunity.”
Seventy-five percent of motor insurance policies in the UK are sold through price comparison websites, and Hastings is a leading distributor of policies by this means.
Hastings yesterday reported a 31percent jump in first-half adjusted operating profit to £78.3m, driven by strong policy growth and a fall in motor claims as Britons drove less due to the coronavirus restrictions.
RMI shares closed 0.16percent lower at R31.55 on the JSE yesterday.
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