Merrill boost for RSA's Aussie float

By LACHLAN COLQUHOUN
Updated:

 

INSURER Royal & SunAlliance's plan to float its Australasian operations has received a boost after broker Merrill Lynch valued the unit at £746m - around 20% higher than most estimates.

The valuation will give new optimism to RSA's management. The Australasian operations have failed to find a trade buyer despite being on the auction block for most of this year. They are due to float next year.

Aviva recently sold its Australian general insurance business to Insurance Australia Group for A$1.86bn (£667m), but investors spurned IAG's capital raising to fund the purchase.

While Merrill's valuation is higher than most others - which have gone as low as A$1.5bn - the brokerage said it saw a trade sale 'as more palatable from a vendor's perspective'. It added: 'We believe it would be difficult for an initial public offering in current market conditions to garner a full price for the assets.'

Merrill said the most likely buyer would be a North American general insurer. The operations are expected to earn up to A$180m, which - taking Merrill's A$2.1bn valuation - implies a price-earnings ratio of 11 to 12 times.

RSA, chaired by Sir Patrick Gillam, is still seeking a chief executive after Bob Mendelsohn was ousted in September.

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