RSA plans to raise £800m from float of Australasian arm
Royal & SunAlliance, the insurer trying to plug a £700m shortfall in its funding requirements, yesterday revealed it plans to raise 2.1bn Australian dollars (£800m) from floating its Australian and New Zealand business.
Royal & SunAlliance, the insurer trying to plug a £700m shortfall in its funding requirements, yesterday revealed it plans to raise 2.1bn Australian dollars (£800m) from floating its Australian and New Zealand business.
Promina, the new name for the business, will list on the Australian and New Zealand stock exchange in May and will be the world's largest initial public offering this year.
After disposal costs, RSA will bank in the region of £630m from the float.
RSA admitted to its financing difficulties in November, and unveiled plans to sell businesses, exit unprofitable insurance lines and cut 12,000 jobs from its divisions around the world.
The Australian float is key to the survival of RSA, but investors are concerned, however, that reserves will still need to be increased further. RSA's financial strength and credit ratings face being lowered should it fail to execute its disposal programme, and the company may yet be forced in to a rights issue.
There is still some scepticism from investors that the float may not receive enough support and some analysts have questioned the logic of disposing of one of the group's best-performing businesses. Analysts in the UK are expecting the listing to come in at 10 to 15 per cent below the top line amount of A$2.1bn.
Goldman Sachs and Macquarie are joint lead-managers for the share sale, with ABN Amro Rothschild, JB Were, JP Morgan Chase and Merrill Lynch helping to sell the shares.
Promina does have exposure to asbestos claims through its commercial insurance business. Goldman Sachs, in a note to potential investors sent out last week, highlighted the possible growth in asbestos claims and told investors the situation needed careful monitoring.
Andy Haste, the new chief executive of RSA, joins the company tomorrow alongside its new chairman, John Napier, who is also chairman of the Kelda group. The former chief executive, Bob Mendelsohn, was ousted from the board in September after four years of falling profit. Shares in the company have fallen 43 per cent this year and closed down nearly 5 per cent yesterday at 68.25p. Shareholders in the UK will be asked to approve the Australian flotation.
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