Aviva agrees Friends Life deal

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".