UK specialist insurer Beazley confirmed on Wednesday that it would recommend an enhanced proposal from Zurich Insurance PLC once the Swiss insurer turns the approach into a firm offer. The improved proposal values Beazley at up to 1,335 pence per share, reflecting 1,310 pence in cash per share together with permitted dividends of up to 25 pence per share, and an aggregate value of about 8 billion pounds.
The announcement follows earlier turn-downs of Zurich bids: Beazley rejected a 1,280 pence per share offer from Zurich in January and had previously declined a 1,315 pence per share proposal in June. The board said it is "minded to recommend" the new proposal provided Zurich proceeds with a formal offer by Feb. 16 in line with UK takeover rules.
The market reacted swiftly. Beazley shares rose as much as 9% to a record intraday high of 1,265 pence. Commenting on the outlook for competing bids and the chances of the transaction completing, Mark Kelly, chief executive of advisory firm MKI Global, said, "After announcement it would seem risks should be low - both from any potential competing offer and indeed in terms of threat to closing."
Zurich has indicated the strategic rationale behind its interest. The Swiss insurer said acquiring Beazley would deepen its capabilities in specialty lines of insurance - areas that include cyber, marine, aviation and space, and fine art - while also expanding its presence in the UK market. The move comes at a time when Zurich's greater exposure to the US and headwinds from a weaker dollar have weighed on its own performance and share price.
In a joint statement, the two companies said Zurich looks forward to starting confirmatory due diligence on Beazley and to working with Beazley toward a binding offer announcement. The potential takeover is another example of a foreign bidder pursuing a London-listed company, a trend the statement attributed to comparatively lower UK valuations attracting overseas buyers.
The Swiss insurer disclosed that it had taken a 1.47% stake in Beazley earlier in the week. Currency used in reporting the deal was also noted: $1 = 0.7292 pounds. Beyond those specifics, both companies pointed to the normal next steps in a potential deal process - due diligence followed by any binding offer - without providing additional timing or conditionality beyond the UK takeover timetable.