Friends Life Group Ltd And Aviva plc In £5.6bn Merger Talks

Aviva plc (LON:AV) and Friends Life Group Ltd (LON:FLG) discuss a tie-up.

Sam Robson

I've been a Fool for over a decade, and am proud to currently call myself the Editor in Chief of TMF UK. I follow Foolish investing principles, and buy shares in quality companies throughout both bull and bear markets!

Published 22 November, 2014 2:04 pm GMT

| More on: AV.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

FTSE 100 giants Aviva (LSE: AV) (NYSE: AV.US) and Friends Life (LSE: FLG) have announced that they are in talks over a possible tie-up to combine both companies into the UK’s leading insurance, savings and asset management business.

The news broke late on Friday afternoon after the market had closed. Both boards have confirmed that they have reached agreement on the key financial terms of a possible all share combination, which would see Aviva acquire the entire ordinary share capital of Friends Life on the basis of an exchange ratio of 0.74 Aviva ordinary shares for each Friends Life ordinary share.

The offer represents a value of approximately 398.9p per Friends Life share (not including the value of the Friends Life final dividend for 2014) representing an indicative premium of 15% to Friends Life’s closing share price on 21 November and a premium of 28% to Friends Life’s three-month average share price of 310p.

If the £5.6bn touted deal goes ahead, the enlarged company would see a stronger balance sheet and significantly higher cash flows, leading in turn to an accelerated growth of Aviva’s dividend.