Xchanging’s board has urged shareholders to accept Capita’s 160 pence ($3.38) cash offer for the company unless a better bid comes along.

The UK insurance outsourcing company, which is active in the Australian market, is still in talks with US private equity group Apollo Global Management about its potential offer of 170 pence ($3.60) per share.

But it says Apollo “has not reached the stage at which it is prepared to announce a firm intention to make an offer… and there can be no certainty Apollo will do so”.

Capita’s offer values Xchanging at £412 million ($873 million).

“The Xchanging directors… consider the terms of the offer to be fair and reasonable,” the company says. “In the absence of a higher offer, the Xchanging directors intend unanimously to recommend that… shareholders accept the offer.

“The Xchanging directors believe Capita is a credible counterparty with a strong track record of acquiring and integrating businesses. The Xchanging directors believe there is a strategic logic and potential business benefits to a combination of Xchanging and Capita.”

Capita says the acquisition is expected to deliver at least £35 million ($74 million) in cost-synergy benefits and provide Xchanging with the support to grow its business.

“The Capita board believes the proposed acquisition represents a compelling opportunity for Capita, has a clear strategic rationale and substantial synergy potential, as well as generating shareholder value,” Capita says.

Offer documents will be mailed to Xchanging shareholders by November 11.