The UK's biggest insurer Aviva has revealed details of a planned friendly takeover offer for its domestic rival Prudential. The deal, reportedly worth a total of GBP17 billion, has been published so that shareholders of both companies can informally inspect the offer. However, Prudential has already rejected the approach.
Norwich Union owner Aviva said that it made a written proposal to the board of Prudential for a merger on March 16. Although Aviva said it is not prepared to launch a hostile takeover, it has provided shareholders access to the details in the hope of generating support for the idea. The UK market leader is proposing a bigger dividend and estimated cost savings of GBP230 million per annum before tax.
Aviva is proposing a merger ration of 82 new Aviva shares per 100 Prudential shares held, which represents a 10% premium for Prudential shareholders, and a dividend uplift of 37%. The group would also put Richard Harvey, Aviva’s chief executive, in charge.
Mr Harvey said: This is a real opportunity to create a leading player in the global savings, investments and insurance market. The group would have significant presence and growth opportunities in Europe, Asia and the US. This is a value-creating proposition for the shareholders of both companies.
Prudential, which released full-year results last week, said the proposal was unsolicited and unwelcome. Sir David Clementi, chairman of Prudential, said: Last week’s strong results demonstrate the positive momentum of Prudential’s businesses and the exciting prospects evident under our new management team. The board does not believe the proposal is in the interests of Prudential shareholders.
A merger would create a British insurance group worth GBP37 billion. However, the proposal may spark a bidding war with insurers such as France’s Axa and US group AIG potentially also making an offer.