10% more could take RSA over finish line for Aviva assets, says investor

A DEAL between Aviva and RSA remains within reach if RSA is willing to raise its bid proposal for Aviva's general insurance units by 10 per cent, according to a shareholder in both firms.

Martin Brown, investment manager at Glasgow-based Ignis Asset Management, said RSA's approach undervalued the Aviva businesses. Ignis owns roughly 0.5 per cent of Aviva's share capital and a stake of about 1.5 per cent in RSA.

He said RSA would not necessarily have to raise its bid by much to oblige Aviva to put the proposal to its shareholders and for a deal to remain accretive for RSA's own shareholders.

Brown said: "The deal definitely remains possible. There's no reason for it to be dead other than for RSA to be unwilling to pay more, but RSA would not have to raise its offer by much for Aviva to be obliged to consider it.

"A 10 per cent increase might be enough to persuade Aviva to consider it, or to oblige Aviva to put it to its shareholders."

On Monday, RSA said it was open to talks with Aviva after its larger rival rejected RSA's 5 billion bid proposal for some of Aviva's main general insurance businesses.

RSA - which owns the More Than insurance brand - has declined to comment on whether it may raise its offer.

Paul Mumford of Cavendish Asset Management - which holds about one million Aviva shares and 470,000 RSA shares - said RSA would have to raise its offer. Mumford said: "I would have thought there was probably some scope for improving the offer but I'm quite happy with Aviva in its current form without a break-up."

Aviva shares stood at 367.3p on 12 August, the day before news of RSA's approach leaked out to the markets.

Since then, the stock has risen about 5 per cent, with the shares also supported by market speculation that French insurer AXA might be interested in Aviva.

However, Aviva shares have failed to break through the 400p barrier - indicating some investor scepticism over whether the two insurers will get round to striking a deal.

One analyst said: "RSA made an opportunistic approach and it was rejected. After that, there wasn't much they could do other than leak it to the press."

One of Aviva's top ten institutional shareholders, which declined to be named, said there was a good chance that RSA's interest may come to nothing, with investors' memories fresh of Prudential's failed bid for AIG's Asian division.

Shares in Aviva closed down 4.2p last night at 377.7p, while RSA fell 1p to 122.6p.