RSA expects 'no competition issues' on Aviva Irish unit bid
ROYAL & Sun Alliance (RSA) believes its proposed takeover of Aviva's Irish business would face no competition issues, even though the merged insurer could be almost three times the size of its closest rival.
Details of the deal's Irish aspect emerged yesterday as the UK insurance giant defended its £5bn (€6.1bn) bid to buy Aviva's UK, Canadian and Irish general insurance businesses.
The bid was rebuffed by the Aviva board in late July, but RSA yesterday insisted the deal "would be in the best interests of both sets of shareholders".
"RSA remains open to discussions with Aviva," the insurer stressed in a statement, with sources last night claiming the bid was "very much live" despite Aviva's board-level rejection.
Aviva is facing mounting pressure to put the proposal to its shareholders, despite management's insistence that investors' interests are best served by retaining the assets.
In the Irish market, Aviva is already the single largest general insurance player, with a 16pc share of all the market. RSA recently said it was on track to clinch a market share of 14pc after its acquisition of online broker 123.ie.
With a market share of up to 30pc between them, the merged insurance group would dwarf its nearest rivals FBD and Quinn, who are both thought to have about 12pc.
Sources in the Irish insurance world last night described the proposed deal as a "clear competition issue", pointing to the massive dominance a merged RSA/Aviva operation would have.
"We looked at the competition issues straight away," an RSA source said yesterday. "We're happy that there would be no competition issues in any of the jurisdictions."
The Competition Authority yesterday confirmed that it would review any merger or acquisition where the companies involved had revenue of more than €40m.
The probe could look at the general insurance market as a whole or could look at "sub markets" such as household and motor insurance, the Irish Independent understands.
"The test is substantial lessening of competition not market share," the authority yesterday stressed.
"If two companies were allowed to do a deal, would they be able to raise prices and engage in activity that was anti-competitive?"
Defending their decision to reject the bid, Aviva yesterday said the general insurance market was at a "cyclical low", with the business performance "not reflecting its full earnings potential".
Operating profits across Aviva's general insurance businesses came in at £1bn in 2009, against £1.7bn in 2006.
Aviva also pointed out the "highly cash generative" nature of the general insurance businesses, which support "a healthy and increasing dividend for shareholders".
In its statement, RSA said Aviva had rejected the proposal "without any discussions taking place", provoking ire from some quarters of Aviva's investor base.
Aviva chairman Colin Sharman yesterday said his board has "considered RSA's proposal carefully" before unanimously rejecting it.
News of RSA's approach comes after a period of significant change at Aviva that saw the Irish operation become a branch of Aviva Europe, which is also headquartered in Dublin.
Aviva has also just hosted the first matches in the heavily branded Aviva stadium, formerly known as Lansdowne Road.