British general insurer RSA is considering acquisitions in the order of 600 million pounds ($1 billion) and may fund any deal by selling new shares, analysts at broker Keefe, Bruyette & Woods said on Tuesday. RSA executives told a KBW conference on Monday the group was mulling bigger takeovers than the ‘bolt-on’ acquisitions it has traditionally pursued, and named Latin America and Canada as areas of potential interest, KBW analysts said in a note.
RSA, best known in Britain for its More Than car and home insurance business, was reported earlier this month to be considering a 600 million pound rights issue. Leading RSA shareholders have told Reuters they would back a cash call only if the company presented an acqusition plan.
An RSA spokesman said the company’s presentation to the KBW conference, led by finance chief George Culmer, did not mark a change to its previously-stated acquisitions strategy.
RSA shares were down 0.8 percent at 125 pence by 0900 GMT, while the FTSE 100 share index was down 0.3 percent. Analysts said large-scale acquisitions could help drive growth at RSA, currently hit by slower sales as the recession bites, and facing limited opportunities for efficiency gains after several years of successful cost-cutting programmes.
‘There are challenges there, and that may be one factor driving them to look at acquisitions, said Numis Securities analyst Richard Gradidge. ‘The reports today would suggest they have admitted they’re considering larger deals which could require a rights issue.
RSA has carried out six small acquisitions so far this year, and the company said at its first-half results last month it had a ‘strong’ deal pipeline.
