RSA Top-Ten Investor Capital Group Trims Stake Before Zurich Bid

The Capital Group Inc., one of RSA Insurance Group Plc’s 10 biggest shareholders, has been cutting its stake every day since Zurich Insurance Group AG said it was weighing a bid for the U.K. company.

The investor has sold almost 19 million pounds ($29 million) of shares since Zurich’s announcement on July 28, which sent RSA stock to the highest since 2013. The disposals have lowered Capital Group’s holding to 3.6 percent from 4 percent before Zurich’s move.

The Los Angeles-based money manager amassed its stake in early 2014, around the time that Stephen Hester joined as chief executive officer. He’s since cut costs and revived earnings after the insurer was battered by an accounting scandal in Ireland and forced to warn investors three times profit would miss analyst estimates. RSA reported an 84 percent jump in first-half earnings on Thursday.

“As far as I can tell, all our shareholders strongly support the direction we are taking and on the plans we have been executing,” Hester said in a telephone interview, adding that he had not spoken to any investor since Zurich’s announcement. “All of us want to see improvement, faster.”

A spokesman for Capital Group, which oversees about $1.35 trillion, declined to comment on Thursday. In December, the firm cut its stake in Aviva Plc by 70 percent soon after the British insurer revealed plans to buy Friends life Group Plc for 5.6 billion pounds.

‘Significant Benefits’

Zurich, which posted second-quarter profit that missed analyst estimates this week, has 28 days since making an announcement to make a formal offer for RSA or walk away for six months unless RSA consents to an extension. Zurich said while acquisition could bring “significant benefits” any purchase still needs to meet its investment criteria.

“It would be prudent to tactically take some money off the table in case a deal is not agreed,” Barrie Cornes, an analyst at Panmure Gordon & Co., wrote in a report. He says a deal is still likely.

Other RSA investors, including Cevian Capital which owns the largest holding with 13 percent in shares and derivatives, have mostly kept their holdings steady ahead of a possible offer from the Swiss insurer.

While Hester said RSA’s board had no “magic number” in mind if an offer was made, Panmure’s Cornes said shareholders should accept an offer of more than 550 pence a share. The stock closed at 510 pence on Thursday.

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