Aviva Agrees To Buy Friends Life For GBP 5.6 Bln

(RTTNews) - British life and health insurer Aviva Plc (AV.L, AV) Tuesday said it has agreed to buy smaller rival Friends Life Group Ltd. (FLG.L) for about 5.6 billion pounds. Following acquisition, Friends Life shareholders will own about 26 percent of the issued ordinary share capital of the enlarged Aviva Group.

Under the terms of the proposed acquisition, shareholders of Friends Life will receive 0.74 new Aviva shares for each Friends Life Share they hold. The deal represents a premium of 15 percent to the closing price of Friends Life Share on November 20.

As at November 20, the deal, excluding the payment to RCAP in relation to the value share and Friends Life's proposed second interim dividend payment in respect of the 2014, values each Friends Life share at 394 pence and Friends Life's existing issued ordinary share capital at about 5.6 billion pounds.

Friends Life's proposed second interim dividend is 24.1 pence per share in respect of the 2014 financial year, resulting in full-year dividend of 31.15 pence per share.

Based on the exchange ratio and the closing price of Aviva as at December 1, 2014, the deal values each Friends Life share at 370 pence, which represents a premium of 8 percent to the closing price of 343 pence as on November 20.

It is intended that the proposed acquisition will be implemented by way of a court-sanctioned scheme of arrangement.

The acquisition is expected to generate nearly 0.6 billion pounds excess cash per annum, and expected to deliver around 225 million pounds of run-rate annual cost synergies by the end of 2017.

Friends Life was formed in 2011 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.

Commenting on the proposed acquisition, John McFarlane, chairman of Aviva stated, "...The Proposed Acquisition not only consolidates Aviva's leading position which Aviva has established in the UK, it is expected to enable a much stronger dividend flow and balance sheet position than would otherwise have been possible."

Following the deal, Andy Briggs, the current Group chief executive of Friends Life, is expected to become chief executive officer of Aviva UK Life and will join the board of Aviva as an executive director. Sir Malcolm Williamson, chairman of Friends Life, is anticipated to join the board of Aviva as senior independent director.

Aviva shares are currently up 2.66 percent to trade at 512.68 pence on 5.61 million shares. Friends Life stock rose 5.24 percent to 385.40 pence, on a volume of 5.24 million shares.