Aviva set for £5.6bn Friends Life takeover

<p>Aviva has agreed to purchase pensions company Friends Life.</p>

A long-awaited takeover of Friends Life by Aviva is set to go ahead.

The insurance giant confirmed that it had agreed to purchase the pensions company in a deal worth £5.6 billion. Once completed it will create the largest insurance, savings and asset management firm in the UK. Following the decision the board of both organisations will recommend the deal to shareholders.

Talks between Aviva and Friends Life have been ongoing for a number of weeks before the decision was announced. Officials hope that the merger of the two organisations will help Aviva to better tackle new reforms which are being implemented on the sector.

Prior to the deal being closed, the companies said in a statement: "A combination of Aviva and Friends Life would create the UK's leading insurance, savings and asset management business by number of customers, with a stronger balance sheet and significantly higher cash flows, enhanced by substantial synergies, from which to accelerate dividend growth."

As part of the agreement, a 15 per cent premium is being offered to Friends Life's closing price on the London Stock Exchange on November 20th. The move will also see shareholders at Friends Life own around 26 per cent of the new group. Aviva expects the new entity to generate around £600 million in excess cash each year while delivering annuals savings of £225 million by the close of 2017.

There will be a number of personnel changes once the new group is formed. Andy Briggs, the current chief executive of Friends Life, will take up the same role at Aviva UK Life while Mark Wilson will stay on as chief executive of the new Aviva Group. Friends Life shareholders will receive 0.74 new Aviva share putting the company at a value of £5.6 billion, unchanged from the takeover figure.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.