Sampo Oyj Sampo Group's Recommended Cash Acquisition Of A Majority Stake In Hastings Group Holdings Plc
05 Août 2020 - 8:44AM
Dow Jones News
TIDMSAMPO
SAMPO PLC INSIDE INFORMATION 5
August 2020 at 9:14 am
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN,
INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
Sampo Group's recommended cash acquisition of a majority stake in
Hastings Group Holdings Plc
Following the announcement of Sampo and Rand Merchant Investment
Holdings Limited's (RMI) potential interest in UK Property & Casualty
(P&C) insurance company Hastings Group Holdings Plc (Hastings), Sampo
and RMI have today announced a recommended cash offer to acquire all
issued and to be issued shares in Hastings not currently owned or
controlled by Sampo and RMI.
The offer price is GBp 250 for each Hastings share, valuing Hastings'
entire issued and to be issued share capital at approximately GBP 1.66
billion or approximately EUR 1.84 billion.
The offer price represents a premium of approximately 37.5 per cent to
the volume-weighted average price of GBp 182 per Hastings Share for the
three-month period ended 28 July 2020 (being the last Business Day
before Hastings announced it had received an approach that may or may
not lead to an offer).
Sampo and RMI have entered into a newly-formed jointly owned company for
the purposes of acquiring Hastings. Following completion of the offer,
Sampo and RMI will own and control 70 per cent and 30 per cent of the
shares and votes in the jointly owned company, respectively. RMI is a
South African financial services investment holding company that is a
29.7 per cent shareholder in Hastings having acquired the stake in 2017
for GBp 248 per share.
The size of Sampo's investment, based on its 70 per cent stake, would be
GBP 1.16 billion or EUR 1.29 billion valued at the offer price.
Sampo expects to fund its part of the acquisition with approximately EUR
1 billion of newly issued hybrid Tier 2 capital with the residual coming
from existing cash resources.
Strategic rationale for acquisition
Sampo has a strategic ambition to expand further into non-life insurance,
a segment where it has extensive experience and expertise. As part of
this strategy, and in the context of its leading market positions in the
Nordic markets, Sampo has been considering a geographic expansion beyond
its current footprint. Sampo believes that the UK, as one of the
largest retail P&C markets in Europe, offers an attractive scale
opportunity.
In this context, the acquisition of Hastings represents an attractive
opportunity for Sampo to advance its strategy and accelerate its
repositioning towards retail P&C insurance. Hastings is a leading motor
insurer in the UK and has recently been diversifying into other non-life
insurance products including home insurance. Both motor and home
insurance represent large markets in the UK with growth potential for
the Hastings business.
The acquisition of Hastings provides an attractively positioned platform
in one of the most digitally advanced markets globally. The UK is
characterized by its high levels of digital distribution and Hastings is
one of the leading distributors of motor insurance policies in this
market. Sampo believes that, under its ownership together with that of
RMI, Hastings will be able to further develop its agile and digital
business model to create long-term value.
RMI has a similar investment philosophy to Sampo, with a long-term
horizon and a focus on building enduring value over many and differing
market cycles. Given the significant retail P&C insurance experience and
expertise of Sampo, through its subsidiaries If P&C Insurance and
Topdanmark, and RMI, through its ownership of OUTsurance and existing
shareholding in Hastings, the intention is to combine this knowledge to
drive the strategic direction of Hastings. RMI brings institutional
knowledge in Hastings and the UK P&C market to the jointly owned
company.
Sampo and RMI intend for Hastings to continue to be operated on a
standalone but unlisted basis. Sampo believes that a private partnership
with RMI provides an optimal structure for Hastings to fulfil its
potential and build long-term value for its stakeholders. As a private
company, Sampo believes Hastings will benefit from a more long-term
approach to decision making.
Sampo and RMI believe with their experience and under private ownership
there are a number of areas of Hastings' operations that can be improved,
including claims handling sophistication, expansion into home insurance,
customer retention and reinsurance strategy.
Financial impact of an acquisition on Sampo Group
The Sampo Board expects the acquisition of Hastings to be accretive to
earnings per share and RoE from the first full year following
completion. Sampo estimates the transaction will have a positive impact
on earnings per share in the mid-single digits (%). Meanwhile, it is
expected that Sampo's solvency position will remain robust at
approximately 175 per cent (post planned issuance of approximately EUR 1
billion of hybrid Tier 2 capital to part finance the transaction).
Sampo does not believe that the transaction will lead to a change in the
Group's credit ratings subject to the planned financing structure. The
Sampo Board do not expect the acquisition to impact the Sampo's dividend
policy in the short-term but is expected to enhance the dividend
potential in the long-term.
General information about Hastings
Founded in 1996, Hastings is one of the leading property and casualty
insurance (P&C) providers to the UK market, with approximately 3 million
live customer policies and employing over 3,500 colleagues at sites in
Bexhill, Leicester, Gibraltar and London. Hastings provides
straightforward products and services to UK car, bike, van and home
insurance customers with around 90 per cent of policies directly
underwritten by Hastings' Gibraltar-based underwriting business,
Advantage Insurance Company Limited (Advantage).
Hastings operates as an insurance provider with two separate businesses.
Hastings' retail business, Hastings Insurance Services Limited, is
responsible for product design, pricing, fraud management, distribution
and management of the underlying customer relationships. Hastings'
underwriting business, Advantage Insurance Company Limited, undertakes
risk selection, underlying technical pricing, reserving and claims
handling.
For the six months ending 30 June 2020, Hastings reported gross written
premiums of GBP 515 million, with underlying average premiums up 3 per
cent. Hastings reported underlying profit after taxes of GBP 56 million.
For the year ending 31 December 2019, Hastings reported gross written
premiums of GBP 962 million, with underlying average premiums up 5 per
cent on the same period in 2018. Hastings reported underlying profit
after taxes of GBP 72 million.
Hastings Key Financials
GBP million unless otherwise
stated 2015 2016 2017 2018 2019 H1 20
Gross written premiums 615 769 931 958 962 515
Net revenue 481 597 716 756 741 393
Adjusted operating profit 126 152 184 191 110 78
Underlying profit after taxes 76 115 145 149 72 56
EPS (GBp) 0.5 11.9 19.2 19.8 10.6 8.4
Loss ratio (%) 75.4 77.7 73.0 75.0 82.6 75.6
Expense ratio (%) 15.9 13.6 14.0 14.4 15.5 16.6
Combined ratio (%) 91.3 91.3 87.0 89.4 98.0 92.2
Advantage Solvency II ratio
(%) (post dividend) 156 140 167 161 151 151
Live customer policies (million) 2.04 2.35 2.64 2.71 2.85 2.96
General information about RMI and the shareholders agreement
RMI is a South African financial services investment holding company
founded in 1977 and listed on the Johannesburg Stock Exchange with a
market capitalization of ZAR 48.4 billion or EUR 2.4 billion on 4 August
2020.
RMI aims to be a value-adding, active enabler of leadership and
innovation in financial services and currently holds an investment
portfolio including its existing investment in Hastings and investments
in some of South Africa's premier insurance brands and in
next-generation financial services and asset management companies. RMI
has been the largest shareholder in Hastings since 2017.
Sampo and RMI have entered into a long-term partnership in relation to
Hastings. The governance of the jointly owned company reflects the
relative shareholdings of Sampo and RMI, recognizing Sampo's controlling
position, but protecting RMI's interest with customary minority
protections. The shareholder agreement includes customary exit
arrangements for agreements of this type.
Hastings Board recommendation and transaction structure
The independent directors of Hastings intend to recommend unanimously
that Hastings' shareholders approve the offer and have entered into
irrevocable undertakings to do so in an amount of 0.33 per cent of
Hastings' issued share capital.
It is intended that the offer will be implemented by way of a
court-sanctioned scheme of arrangement under English law. The scheme
document is expected to be posted to Hastings' shareholders within 28
days after the 2.7 announcement and Hastings' shareholder meetings to
approve the scheme will take place no earlier than 21 days after posting
of the scheme document. It is expected that Hastings' shareholder
meeting to approve the scheme will take place before the end of
September 2020. Sampo and RMI expect all other conditions and regulatory
approvals to be satisfied, and the scheme to become effective, by
year-end.
More information on the offer at
https://www.globenewswire.com/Tracker?data=B8Ut-apu4W5UCkiKO3vCuYqD7F9mhJ3vp_L3EqS387T6rMFAnI_uQ10MAhgsQhJu9TBsD3YomYEbxxlJnmnD0MGQ1BGZjlWzq2bDbXhvTQ8=
www.sampo.com/offer and
https://www.globenewswire.com/Tracker?data=B8Ut-apu4W5UCkiKO3vCudGWEpIVJM5hl9xDg0vUSW-aTKiQhhcMV95C5edtq-POg7w9zQ2K_-DXESvnkqfnUc7tUXEmbNJ9byeZoVQZrkg=
www.hastingsplc.com.
Advisors
J.P. Morgan Securities Plc is acting as Financial Adviser to Sampo and
RMI in connection with the offer.
Allen & Overy LLP is acting as legal adviser to Sampo and RMI in
connection with the offer.
J.P. Morgan Securities Plc and Nordea Bank Abp will serve as joint lead
managers for Sampo's hybrid T2 bond issue.
SAMPO PLC
Investor Relations and Group Communications
Further information:
Ricard Wennerklint
Chief of Strategy
Tel: +46 8 792 8022
Jarmo Salonen
Head of Investor Relations and Group Communications
Tel: +358 10 516 0030
Maria Silander
Communications Manager, Media Relations
Tel: +358 10 516 0031
J.P. Morgan Securities plc, which conducts its UK investment banking
business as J.P. Morgan Cazenove (J.P. Morgan Cazenove), is authorised
in the UK by the Prudential Regulation Authority and regulated in the UK
by the Prudential Regulation Authority and the FCA. J.P. Morgan Cazenove
is acting as financial adviser exclusively for Sampo and RMI and no one
else in connection with the matters set out in this announcement and
will not regard any other person as its client in relation to the
matters in this announcement and will not be responsible to anyone other
than Sampo and RMI for providing the protections afforded to clients of
J.P. Morgan Cazenove, or for providing advice in relation to any matter
referred to herein.
Distribution:
Nasdaq Helsinki
London Stock Exchange
The principal media
Financial Supervisory Authority
https://www.globenewswire.com/Tracker?data=B8Ut-apu4W5UCkiKO3vCuUuE_cqj-yUczXvY-WbUaY-XEF9sGFNOoliZFBDjOJdGJU3HUdBPL9mJ2AFPiDRyIw==
www.sampo.com
(END) Dow Jones Newswires
August 05, 2020 02:29 ET (06:29 GMT)
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