RSA share price plummets 20 per cent as Zurich Insurance says talks are off for possible takeover
RSA Insurance Group's share price plunged this morning after rival firm Zurich revealed it was walking away from the £5.6bn takeover bid.
RSA's share price was down 21.9 per cent in early morning trading as investors digested the shock news. Zurich's share price was also down, albeit a less remarkable 2.3 per cent.
Zurich said it was abandoning the bid after its own performance was affected by a number of issues, including losses associated with the explosions at Tianjin, China in mid-August estimated at an aggregate of $275m (£177m).
The company also warned that weaker-than-expected profitability in the general insurance business in the first half of 2015 could continue into the third quarter.
Read more: Zurich could "walk away" from RSA as profit rises
"In light of the above recent deterioration in the trading performance in the group's general insurance business, Zurich announced this morning that it has terminated its discussions in connection with a possible offer for RSA," the company said in a statement.
RSA has also commented on the situation, saying: "Zurich has confirmed to RSA that the due diligence findings were in line with their expectations and, while the process had not been finally concluded, they had not found anything that would have prevented them from proceeding with the transaction on the terms announced on 25 August 2015.
"Zurich’s interest in acquiring RSA … was unsolicited. Since that time, RSA has continued to make good progress in the delivery of its action plans, as evidenced by our half year results. Trading results for July and August have been positive and ahead of our expectations."
Read more: RSA share price soars 12 per cent after Zurich confirms takeover talks
It was first reported Zurich was interested in making a bid in excess of £5.5bn for RSA in July, in light of new rules governing how much money insurers must set aside to protect against potential market shocks.
Zurich then increased its bid in August to 550p per share in cash, valuing RSA at around £5.6bn, up from July’s bid which was understood to be around £5.5bn.