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Aviva and Friends Life edge closer to merger

Article By: ,  Financial Analyst
November 24, 2014 10:26 AM

A merger between Aviva and Friends Life has moved a step closer as the companies hold talks on a potential deal.

Representatives from both organisations confirmed that discussions have been ongoing and Aviva has agreed key terms over a possible deal. The move would see Aviva purchase Friends Life Group in a deal worth around £5.63 billion. The company hopes that by completing the acquisition of its UK life and pensions rival it will allow it to better tackle the new reforms imposed on the sector.

Speaking prior to the agreement, both 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."

Friends Life has still to receive a firm offer for its operations but has previously indicated that it is willing to recommend the key financial terms of the possible offer to Aviva when it is put on the table. Friends Life currently values its share price at 398.9p per share, which represents a 51.2 pence increase on its closing price on Friday (November 21st) when news of the talks was first broke.

If completed, the deal would see Friends Life shareholders own around 26 per cent of the new group. It would also represent one of the largest deals in the company's history while also completing the legacy of outgoing Aviva chairman John McFarlane who appointed Mark Wilson as chief executive two years ago.

Combining Aviva and Friends Life would create the largest insurance, savings and asset management firm in the UK. The combined company would boast a customer base of around 16 million. It would also improve on Aviva's 31 million customers across the globe.

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