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Aviva set for 5 6bn Friends Life takeover

Article By: ,  Financial Analyst
December 2, 2014 11:26 AM

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.

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