RSA legal head banks price rise

On 18 November, RSA Insurance (RSA) accepted a consortium-led takeover offer from international rivals Tryg and Intact. A day later, with the stock price at a two-year high of 675.2p, the insurer’s legal head and company secretary Charlotte Heiss sold 29,968 shares.

What, if anything, should investors make of the timing of these events?

The first thing to note is that while Ms Heiss is classed as a ‘Person Discharging Managerial Responsibility’ for regulatory purposes, and therefore required to hold a minimum number of shares, she is not a director. This means she is free from the constraints placed on RSA’s board, which has pledged to vote in favour of the takeover via the 1.34m shares its directors collectively own.

These so-called irrevocable undertakings effectively mean the directors’ holdings are locked in until the £7.2bn deal completes. In a similar vein, as an insider Ms Heiss would have been restricted from trading in RSA shares from the moment the company opened discussions with Tryg and Intact in August.

The 19 November was therefore the first date the general counsel could make the disposal. RSA declined to comment on the sale.

Whether other shareholders choose to bank profits ahead of the deal’s completion –currently slated for the second quarter of 2021 – will depend on their assessment of the real or perceived obstacles ahead.

These include a volatile market backdrop, the need to satisfy a raft of regulatory and competition authorities, a major rights issue by Tryg, and the prospect of eleventh hour government intervention – however unlikely the latter hurdle currently seems.

At 677p, the shares now trade at a 2.3 per cent discount to the combined 685p offer price and 8p half-year dividend. Even if a new premium has been set, the current price is not much of an insurance policy, particularly given the slim chances of a rival bid. Await documents.

Last IC View: Hold, 672p, 18 Nov 2020