Aviva agrees Friends Life deal
Aviva, Britain’s second-biggest insurer, has reached a preliminary deal to buy smaller rival Friends Life.
Aviva, Britain's second-biggest insurer, has reached a preliminary deal to buy smaller rival Friends Life for £5.6bn in shares. A deal would create the UK market's biggest life assurer, with a joint market capitalisation of £20bn and £300bn of assets. Investors weren't keen: Aviva's shares slid 5% on the news.
What the commentators said
"No doubt there will be some gaudy" savings numbers put about to persuade doubters, said James Moore in The Independent. But this sector "has a rotten record" on delivering mergers and acquisitions benefits to its shareholders. Aviva's CEO Mark Wilson has gained kudos by streamlining Aviva effectively. This deal puts his "stellar reputation at risk". A key worry is IT, said The Daily Telegraph's John Ficenec. Integrating all the different computer systems from previous acquisitions "is a Gordian knot". Royal Bank of Scotland has shown what can go wrong in these circumstances. This deal is all about Aviva snapping up a debt-free firm to repair the balance sheet, said Shore Capital's Eammon Flanagan, and buying cash flow to finance a dividend stream "they have hinted at". It's essentially "a rights issue in disguise".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
-
Barclays begins paying up to £100 compensation to customers after banking outage
Barclays will pay up to £7.5 million in compensation to customers after its banking services were disrupted by an IT outage
By Daniel Hilton Published
-
Review: Shangri-La Paris – an ode to the world’s best food
Natasha Langan enjoys fine French and Chinese cuisine at the Shangri-La Paris
By Natasha Langan Published
-
What pension providers don't tell you about your retirement money
Check the small print from your pension provider or risk losing thousands.
By Merryn Somerset Webb Published
-
Aviva’s jab at preference shares leaves scars
Features A backlash has forced Aviva to think again about scrapping its preference shares – but the damage is done, says John Stepek.
By John Stepek Published
-
Aviva has had a rethink on preference shares, but what now?
Features Aviva’s abandoned proposal to cancel £450m of preference shares has left a lot of people out of pocket. This isn’t over, says Merryn Somerset Webb. Not by a long chalk.
By Merryn Somerset Webb Published
-
Buy-to-letters set up shop
Features Buy-to-let landlords are turning to commercial property in their search for higher yields and greater stability. Sarah Moore explains.
By Sarah Moore Published
-
Company in the news: Aviva
Features Aviva has made a play for life insurer Friends Life. Phil Oakley explains what investors should do next.
By Phil Oakley Published