Friends Life suspends share buyback amid £5bn Aviva deal talks

Friends Life has suspended a £317m share buyback programme as it negotiates the finer points of a proposed £5bn tie-up with rival Aviva.

The insurance group has already repurchased 9,057,00 ordinary shares worth a total of £29,850,077 after kicking off the buyback on October 31. However, it has cancelled two further planned buybacks comprising 6,132,000 shares and 2,925,000 shares.

It said that should the talks with Aviva collapse, it would "look to reinstate the buyback programme at the earliest available opportunity".

Friends Life announced in July that it would use the proceeds from its £317m sale of Lombard to fund a £261m share buyback programme. In August it increased the value of the buyback to £317m.

Aviva revealed on Friday that it was in the late stage talks with Friends Life, in a deal that would create a company worth more than £20bn. The Norwich-based firm aims to become Britain’s largest life insurer.

Aviva has made a potential offer of 0.74 shares for every Friends Life share, giving the latter’s investors a 15pc premium to the most recent trading price, the companies said.

The approach valued Friends Life shares at 398.9p and the entire company at more than £5.6bn.

Shares in Friends Life closed at 347.7p on Friday night, giving the firm a market value of about £4.9bn.

Friends Life, known as Resolution until May, said its board was willing to recommend the offer to shareholders, who would own 26pc of the enlarged group.

Under Takeover Panel rules, Aviva must make a firm offer by 5pm on December 19 or walk away from the deal for at least six months.

Morgan Stanley, JP Morgan Cazenove and Robey Warshaw are advising Aviva, while Goldman Sachs, Barclays and RBC Capital Markets are advising Friends Life.