Aviva and Friends Life have agreed the terms of a £5.6bn tie-up which would create the UK's biggest savings and insurance business.
If the deal is approved by investors, Friends Life shareholders will receive 0.74 Aviva shares for each of their own shares, a 15% premium on their value as of November 20th, the day before the proposal was announced. Aviva shareholders will own 74% of the newly created group, which will serve around one quarter of UK households.
The merger is expected to create £225m of annual cost savings and £600m in excess cash flow per year, although there are not-surprising concerns that a substantial number of jobs are at risk.
'It is inevitable that when you put two organisations together, there will be, there may be, some reduction in headcount,' Mark Wilson, chief executive of Aviva, told the Guardian.'We are going to talk to our people... We have got some way to go before this transaction is complete.'
Wilson is expected to stay on as chief exec of the expanded Aviva Group while Friends Life boss Andy Briggs will be handed control of Aviva UK Life.
Aviva investors didn't seem keen on the deal when plans were first announced on November 21st and its shares fell around 5%. Today they just seem a bit confused: shares yoyo'd, opening up at first before falling below yesterday's close price and then rocketing again. At last check they were up 2.9% at 514p.
Credit: Yahoo Finance
The deal will be put to a shareholder vote expected to be held in March. That should give them plenty of time to make up their minds.