Aviva agrees £5.6bn takeover of Friends Life

Aviva and Friends Life have reached agreement on a £5.6bn merger to create the UK’s largest insurance, savings and asset-management company.

On 21 November, Aviva issued a statement following “recent press speculation”, confirming it had reached “agreement on the key financial terms” of a buyout that could be worth £5.6bn.

The deal, confirmed today (2 December), sees Friends Life’s shares valued at 394 pence, including a second interim dividend of 24.1p and the company being rebranded Aviva.

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On 24 November, Friends Life’s share price opened at 367p per share, up from Friday’s close of 347.7p. However, Aviva’s share price fell by 3.9 per cent, opening at 522p per share on Monday (24 November).

Friends Life shareholders will own 26 per cent of the enlarged Aviva.

Aviva said it expected the deal to generate about £225m of annual cost savings by the end of 2017, and allow it to pay bigger dividends to shareholders.

However bosses insisted while some savings would come through job cuts in areas where the insurer overlaps, they claimed they wished to keep redundancies to a minimum.

When asked about head count, Mark Wilson, chief executive of Aviva Group, said he would not reveal numbers as he wished to talk to staff first.

He said: “When it comes to the head count we have still got some way to go. The first thing we need to do is consult with our people. We wish to minimise job losses but cut duplication.”

Mr Wilson said as a result of the deal, the two insurers’ customers would now have access to a fuller suite of retirement income products, but added the pair would also look at developing more deals ready for the greater access to pension cash come April 2015.

Following the proposed acquisition, it is anticipated that Andy Briggs, the current group chief executive of Friends Life, will become chief executive of Aviva UK Life, and will join the Aviva board as an executive director.

It is expected that Sir Malcolm Williamson, the current chairman of Friends Life, will also join the Aviva board as a senior independent director, along with another non-executive director of Friends Life.