Allstate won't sell stock to fund acquisition

Allstate Corp., the U.S. insurer said to be a suitor for Royal Bank of Scotland Group Plc's insurance unit, won't issue stock to fund an acquisition, Chief Executive Officer Tom Wilson said today, raising questions about whether RBS will complete a deal.

Without an equity sale, the RBS unit "would be out of reach" for Allstate, said Cliff Gallant, an analyst at KBW Inc. in New York. "Clearly, Tom is thinking that, with Allstate's shares trading at such a cheap valuation, they aren't interested in issuing stock."

Zurich Financial Services AG, Switzerland's biggest insurer, and Northbrook-based Allstate were weighing bids for RBS's insurance unit, three people with knowledge of the matter said in May. Zurich Financial later dropped out of the bidding.

Wilson, during a presentation to investors at a conference in New York today, said he wouldn't comment on specific acquisitions. Asked later about issuing shares, he said, "Not at this price."

RBS's insurance unit may fetch as much as $10.7 billion, or about $1.8 billion less than Edinburgh-based RBS had been seeking, said two of the people, who declined to be identified because no agreement has been reached.

"We refer back to comments we made at the half year that we continue in discussions with a number of interested bidders," RBS spokeswoman Carolyn McAdam said today.

Prospects Slipping

The bank "made it clear they have a certain level of value they want to get, and at the moment most potential purchasers are not prepared to pay that level," said Derek Chambers, a London- based analyst at Standard & Poor's Equity Research Ltd. "That suggests that a transaction is not likely to take place in the near term."

The bank sold shares and shopped the insurance unit in an effort to raise capital after reserves were depleted by writedowns and the purchase of ABN Amro Holding NV last year.

Analysts at Dresdner Kleinwort said this week that RBS will likely meet its capital goals even if it doesn't complete the sale of the insurance unit. RBS sold its 50 percent stake in a consumer-finance venture with Tesco Plc in July for $1.65 billion.

The head of Allstate's property and casualty business said in May that the company was "open" to acquisitions outside the U.S., without confirming an interest in the RBS unit.

Any expansion outside North America would be through a purchase instead of creating units from scratch, said George Ruebenson, the president of Allstate's largest subsidiary.