Berenberg on RSA and Aviva10 Jan 2014 19:52
Not sure if you are still holding Aviva hottentot but read this. http://citywire.co.uk/money/the-expert-view-aviva-mothercare-sainsbury-s/a726867#i=2
Theoretical merit’ in Aviva bid for RSA
Analysts at Berenberg have highlighted the ‘theoretical merit’ for insurer Aviva (AV.L) if it chose to bid for RSA (RSA.L).
RSA is facing a £200 million capital shortfall and analyst Matthew Pearson said it could be a target for Aviva, which would have ‘considerable industrial logic’. Aviva is not without its own problems, namely around leverage, which a takeover would not reduce, but make more sustainable.
‘With two-thirds of RSA’s premiums coming from complimentary regions, combining the two operations would establish market leadership positions,’ he said, adding that it would also help ‘cement the delivery of the ‘cash flow plus growth’ strategy’.
Pearson said the analysis of the merits of an acquisition did not mean it would happen but that without ‘radical action’ Aviva would still struggle with leverage issues that would limit dividend prospects.
Pearson retained a ‘sell’ recommendation on Aviva shares and a target price of 415p.
Aviva shares were up 1.32%, or 6p, at 460p on Wednesday.