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RSA Shares Rally to One-Month High Amid Takeover Speculation

Jan. 8 (Bloomberg) -- RSA Insurance Group Plc reached its highest level in a month in London trading amid speculation a competitor may make a takeover offer.

The stock rallied 9.3 percent this week as analysts at UBS AG and Berenberg AG cited the company as a potential takeover target. The insurer tomorrow is scheduled to release the findings of a review by PricewaterhouseCoopers LLP into accounting irregularities at its Irish unit.

The share gain is a “combination of the company going some way into drawing a line under Ireland and speculation about a bid target which reminds investors there is real value in the business,” said Hari Sivakumaran, an analyst at Oriel Securities Ltd. in London with a hold rating on the stock.

The shares sank 27 percent in 2013, erasing about 1.3 billion pounds ($2.1 billion) of market value, after the London-based insurer issued three profit warnings in the fourth quarter and injected about 200 million pounds into its Irish unit to help plug a shortfall. It closed up 3 percent today to 100.7 pence, the highest level since Dec. 6.

Berenberg’s Matthew Preston said there was “theoretical merit” in Aviva Plc making an approach for RSA that would help it establish market leadership positions, though investors would likely balk at the suggestion. UBS’s James Shuck said a takeover and break-up of RSA remained a possibility, citing Finland’s Sampo Oyj as a potential “orchestrator.”

Jon Sellors, a spokesman at RSA, declined to comment on the speculation today. Officials at Aviva and Sampo weren’t immediately available to comment.

RSA reiterated after the market closed yesterday that it is “confident” that the accounting irregularities were isolated to Ireland and that the financial impact of the division remained at 200 million pounds.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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