RSA, Aviva plc confirm rejection of RSA’s offer for Aviva’s Canadian general insurance business

RSA has confirmed in “a response to press speculation” that it did in fact propose to acquire Aviva’s Canadian, UK and Irish general insurance business for £5 billion in cash.
In a separate public statement released on the same day, Aviva plc confirmed its board of directors rejected the deal, in part because it felt the offer undervalued its general insurance operations.
RSA says it considered the deal “a fair value” for the target businesses, representing a [price-to-earnings] PE ratio of around 9.8 times and a multiple to net assets of 1.6 times. RSA says the businesses it sought from Aviva had a profit of around £510 million in 2009 and net assets of about £3.2 billion.
RSA said it “remains open to discussions with Aviva.”
Aviva said in its statement that given the “compelling strategic and financial benefits to Aviva shareholders of retaining the GI [general insurance] business, its upside potential and the terms offered by RSA, the board was unanimous in rejecting this proposal.”
Aviva said the general insurance market is at a cyclical low. “Accordingly, the current business performance does not reflect its full earning potential,” the company said.
“Aviva is the leading general insurance business in the U.K. and in Ireland, and the number two player in Canada, and should be valued accordingly,” Aviva’s statement said.