Aviva agrees £5.6bn takeover of Friends Life

2nd Dec 2014 07:11

Insurance giant Aviva has agreed a £5.6bn takeover of rival Friends Life in a deal giving the latter's shareholders just over a quarter of the combined group.Aviva said its proposal values Friends Life at 394p per share, versus Monday's closing price of 366.2p and 310p in the three months to 20 November.The group said the deal would result in about £225m of annual savings by the end of 2017, which it has valued at about £1.8bn."Aviva believes these synergies will deliver substantial value and increase cash flow generation and expects significant additional value through capital, financial and revenue synergies over time," Aviva said in a statement.The group also said the deal would secure its position as a leading insurance and savings business in its enlarged home market, with 16m customers in the UK before deducting overlapping customers.It brings 5m current Friends Life customers to Aviva, who stand to benefit from being part of a stronger and more diversified group with a wider product range.Aviva added that it plans to pay a 2014 final dividend of 12.25p per share, representing a 30% increase on the 2013 final dividend per share, and resulting in a 2014 full year dividend of 18.1p per share.Friends Life owner Resolution Group said in a statement that the sale of Friends Life represented the completion of its second UK life project.Friends Life was formed from the consolidation of Friends Provident Group, the majority of the life and pensions business of AXA UK and the UK protection and risk business of BUPA. The project generated approximately net £3bn of value for shareholders, with a net IRR of 12% for Resolution investors since 2009.Clive Cowdery, Resolution's founder, said: "Resolution has now completed a decade of consolidation in the UK life market, strengthening the sector for policyholders and delivering value for shareholders."