Friends Life's share prices soar after £5.6bn merger talks

Friends Life has seen its share price increase by 5.81% since the announcement that it is in talks with Aviva over a possible £5.6bn merger deal.

Related topics:  Retirement
Rozi Jones
24th November 2014
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On Friday, Aviva issued a statement following “recent press speculation”, confirming it has reached “agreement on the key financial terms” of a buyout that could be worth £5.6bn.

Friends Life said it had "indicated to Aviva that it is willing to recommend the key financial terms of the possible offer to Friends Life shareholders"

This morning, Friends Life’s share price opened at 367 pence per share, up from Friday’s close of 347.7p. However, Aviva’s share price has fallen by 3.9% at the time of writing, opening at 522p per share.

Based on Aviva’s closing share price on 21 November 2014, the deal would represent an indicative value of approximately 398.9 pence per Friends Life share, representing a premium of 15%.

Some have suggested that insurers are having to rethink they way they do business when the pension changes come into force in April, which are causing a slide in annuity sales.

Aviva’s statement said the deal would “create the leading insurance and savings business in the UK” with 16m customers, around 5m of which would come from Friends Life.

It added the transaction would lead to a substantial increase in its protection value of new business, more than double its corporate pension assets under administration, and create new opportunities by serving Friends Life’s £2bn of “annual pension vestings”.

The statement read:

“The transaction is also expected to lead to a substantial increase in profits and assets under management at Aviva Investors through the addition, over time, of Friends Life’s UK assets under management which are currently principally outsourced.”

The deal has been agreed subject to “reaching agreement on the other terms and conditions of any offer and the completion of mutual due diligence”.

Under takeover rules, Aviva is required, by not later than 5.00pm 19 December 2014, to either announce a firm intention to make an offer or announce that it does not intend to make an offer.

The statement added:

“There can be no certainty that Aviva will proceed to make an offer for Friends Life. A further announcement will be made in due course.”

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