Market waits for rival bidder to snatch Chaucer from Novae

Novae’s unsolicited bid for its rival Chaucer may fail, market commentators have warned.

The Lloyd’s insurer launched its all-share bid for Chaucer last week, but some believe a rival offer could emerge from another player on the London market or from overseas.

“There is still a lot of overseas interest in Lloyd’s and the key question is whether there will be a competing bid announced,” said Ian Clark, insurance partner at Deloitte.

“We are all sitting back to see if someone else will bid for Chaucer that might be more attractive to shareholders as it gives them cash as opposed to just paper in another company.”

Shorting of both stocks is occurring, said Clark, reflecting investors’ belief that the deal might not go ahead and the prices will fall in consequence.

Last week 1.8% of shares in Novae and Chaucer were out on loan (see charts, above right).

But Dataexplorers, which collates securities lending data, said: “It’s not a lot out on loan compared to the retail sector, some of which has 20% out on loan.”

Chaucer said of the Novae offer: “While the board intends to explore whether the indicative proposal is likely to result in an offer which the board believes to be in the interest of shareholders, the indicative proposal is subject to a number of conditions, and there can be no certainly that the approach will result in an offer being made on the company.”

Chaucer declined to comment on speculation about another approach.

Last week, the Lloyd’s insurer also sought to raise more capital by issuing £75m in a share placing.