Hot on the heels of market reports regarding RSA's recapitalisation plans, Canaccord Genuity pointed out to clients the advantages of a share placement versus a rights issue. Namely, while a placing does not give existing shareholders any rights it can be done much more quickly and typically at a much smaller discount to the existing price.

That meant a smaller dilution for existing shareholders.

A share placement usually implies a discount of between 5-10%, instead of the 35% typically seen in a rights issue.

Furthermore, RSA might opt to raise only £350m via that channel, those same reports had indicated, considerably less than the £500m to £1bn which Canaccord had envisioned. That amount could be supplemented by asset sales, a dividend cut (although that was not certain) and more extensive reinsurance.

In line with the above, Canaccord raised its view on the stock to 'hold' and lifted its target price to 95p from 85p.

"A 10% placing at a 5% discount would be approximately 9% dilutive before the impact of disposals and/or increased reinsurance costs, but we think would be well received by shareholders, who will also likely look to back the new Chief Executive Officer Stephen Hester," the broker concluded.

AB

Related share prices
RSA Insurance Group (RSA) share price