Beazley shares hit a record high on Wednesday after it reached an agreement in principle on the terms of an £8bn takeover by Zurich Insurance.
Under the terms of the proposal, Zurich will pay 1,335p per share, which is a 59.8% premium to the closing share price on 16 January, the last business day before the offer period. The offer comprises 1,310p in cash and a dividend of 25p for the year ended December 2025.
Lloyd's of London insurer Beazley had previously rejected offers of 1,280p a share and 1,230p a share, saying they "materially" undervalued the group.
Beazley said it has carefully considered the proposal, together with its advisers and that it is at a level that it would be minded to recommend to shareholders should a firm intention to make an offer be made.
"The transaction would combine two highly complementary businesses and would establish a leading, global specialty platform with circa $15 billion of gross written premiums, based in the UK which would also leverage Beazley's Lloyd's of London presence," the companies said in a joint statement.
Under UK takeover rules, Zurich has until 1700 GMT on 16 February to make an offer or walk away.
At 0940 GMT, Beazley shares were up 8.4% at 1,257p, having hit as high as 1,270p. Peers Lancashire Holdings and Hiscox also gained, up 3.9% and 4%, respectively.
Dan Coatsworth, head of markets at AJ Bell, said: "It was clear from previous statements that Zurich was determined to own Beazley. Having done the M&A dance for some time and tried its luck with various proposals, Zurich has finally offered the right number to win over the target's board. There is always the right price for everything, and Zurich appears to have found it.
"Zurich now needs to make a formal offer, and it looks the deal could be sewn up in a jiffy. An approximate 60% bid premium is higher than the average bump on UK takeovers in any of the past five years and could be sweet enough to win over shareholders.
"The downside for the UK stock market is the potential loss of another major financials business, and one that has generated significant returns for investors over the years."
Panmure Liberum, which rates Beazley at 'buy', said the revised offer is 2.4x trailing TNAV, which is towards the upper end past specialty insurers have been acquired for.
"Our maths suggested that a price closer to 1400p would be a fair price and affordable for Zurich. Either way, this is a good offer and classic of this point in the underwriting cycle, when pricing starts coming off peaks."