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
-
Landlords ordered to make rental properties more energy efficient by 2030The government has said rental properties must have a minimum EPC rating of C by 2030. We explain how much it will cost landlords to upgrade their buy-to-let portfolio
-
Primark owner Associated British Foods is an overlooked gem going cheap — should you buy shares?Associated British Foods, the owner of Primark, is a family-owned business, which means it is passed over by the increasingly popular passive investment funds. That spells opportunity for private investors, says Jamie Ward.
-
What pension providers don't tell you about your retirement moneyCheck the small print from your pension provider or risk losing thousands.
-
Aviva: One for income investors to tuck awayTips Insurance giant Aviva is one of the highest yielding stocks in the FTSE 100 – and it’s cheap, too, making it a tempting target for income investors. Rupert Hargreaves delves into the numbers.
-
Aviva’s jab at preference shares leaves scarsFeatures A backlash has forced Aviva to think again about scrapping its preference shares – but the damage is done, says John Stepek.
-
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.
-
Buy-to-letters set up shopFeatures Buy-to-let landlords are turning to commercial property in their search for higher yields and greater stability. Sarah Moore explains.
-
Company in the news: AvivaFeatures Aviva has made a play for life insurer Friends Life. Phil Oakley explains what investors should do next.
