10 Apr 2015 16:03
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Don't have an account? Click here to register.Friends Life takeover a "rights issue in disguise" for Aviva, analysts say
Tue, 02nd Dec 2014 10:10
Shore Capital has raised questions with Aviva's £5.6bn takeover of Friends Life, after the companies announced the details of the all-share bid on Tuesday.The broker said that the deal is a "rights issue in disguise" for Aviva, as it reiterated its 'sell' rating on the insurer.Friends Life shareholders will receive 0.74 Aviva shares for each Friends Life share they hold, valuing the group at 394p per share.The deal is expected to generate £0.6bn of excess cash flow per annum, help central liquidity rise to £2.4bn and immediately reduce leverage. £225m of annual savings were targeted by the end of 2017, which it has valued at about £1.8bn.Meanwhile, Friends Life declared a second interim dividend of 24.1p if the deal completes, resulting in a 2014 full-year dividend of 31.15p per share. Shore Capital had expected the full-year pay-out to remain flat on last year at 21.14p per share.Aviva added that it plans to pay a 2014 final dividend of 12.25p per share, representing a 30% increase on the 2013 final dividend per share, and resulting in a 2014 full year dividend of 18.1p per share."We expect the news on the dividends to be welcomed by both sets of shareholders, whilst the cost savings are higher than we had expected," said Shore Capital analyst Eamonn Flanagan."However, the timescale taken to deliver said savings is disappointing, as well as the time required to deliver a neutral impact on earnings. The lack of a figure for the cost of the cost savings is poor, in our view."Flanagan said that the deal is "a rights issue in disguise which does little for the strategic positioning of Aviva".He said: "We remain puzzled why Aviva felt the need to do it now. Is it a camouflage for issues within its own internal restructuring and turnaround story?"Shares in Aviva rose 8.6p or 1.7% to 508p at 11:17 in London while Friends Life shares lifted 14.2p or 3.9% to 380.4p.
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Friends Life lifts profits 38% and hikes divi ahead of proposed Aviva takeover
Ahead of its proposed takeover by larger peer Aviva, insurance group Friends Life Group (FLG) smashed expectations with its 2014 results on Thursday as profits surged and cash generation exceeded guidance. FLG's shares surged in London, buoyed further by forecast-beating full-year numbers from Aviva
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