Aviva merger 'is good for UK': Chief executive Mark Wilson raps critics while analysts warn of 2,000 job cuts
The boss of Aviva has hit back at critics of its proposed takeover of Friends Life, claiming it will create a ‘British champion’ serving one in four UK households.
The two FTSE 100 companies yesterday revealed details of a £5.6bn merger to create an insurance behemoth with 16 million customers and a market value of around £20bn.
Aviva chief executive Mark Wilson refused to speculate on fears it could result in up to 2,000 job losses, and tried to persuade sceptics that it will be good for both shareholders and customers.
Sign of the times: Aviva chief executive Mark Wilson has refused to speculate on fears the merger with Friends Life could result in up to 2,000 job losses
The New Zealander conceded that the proposed deal, leaked last month, came as a surprise to shareholders but insisted it is ‘absolutely consistent’ with its strategy of generating cash and growth.
He also dismissed claims it would distract Aviva (up 0.6p to 500p) from its turnaround plans launched 18 months ago to restore the ailing insurance giant to health.
Saying a deal would be a catalyst for transformation and would create a ‘British champion’, he said: ‘I never want us to be happy with the status quo or we will be like the old Aviva and get arrogant.’
Asked what the bidder’s shareholders made of the biggest insurance merger since Norwich Union and CGU joined forces to create Aviva in 2000, he said: ‘Some people say it’s too cheap, some people say it’s too expensive. So I figure we’ve got it about right.’
Aviva and Friends Provident yesterday kicked off talks with staff about possible job cuts as part of plans to save £225m a year by 2017 and £1.8bn in total.
Analysts suggest this could mean up to 2,000 job cuts because Aviva employs 12,000 staff in the UK and Friends Life has 3,400 UK staff.
Wilson said: ‘I have no idea what it [the number] will be. I don’t want to speculate on the figure.’
The deal will give Aviva around £600m of additional cash flow per year from Friends Life, which should enable it to raise the dividend more quickly. But it will incur one-off costs of £350m to merge the two companies.
Friends Life (up 8.9p to 375.1p) was created by Clive Cowdery, who merged Friends Provident with parts of Axa and Bupa and is in line for a £160m windfall.
It specialises in corporate pensions and protection, and has around £100bn of assets under management, with roughly £70bn of this run by third parties such as Axa. This money is likely to be transferred to Aviva Investors, swelling its assets under administration by almost 30 per cent to £309bn.
The deal values Friends Life shares at 394p, marking a 27 per cent premium to the 310p average closing price in the three months to November 20.
If the deal is backed by shareholders in March, Friends Life shareholders will own 26 per cent of the Aviva group. Aviva’s board have proposed to increase the final dividend by 30 per cent to 12.25p.
Shore Capital analyst Eamonn Flanagan said the deal looked like a ‘rights issue in disguise’ and is concerned it increases Aviva’s focus on the UK pensions market which is in upheaval. He said: ‘We remain puzzled why Aviva felt the need to do it now. Is it camouflage for issues within its own restructuring and turnaround story?’
Most watched Money videos
- The new Volkswagen Passat - a long range PHEV that's only available as an estate
- Paul McCartney's psychedelic Wings 1972 double-decker tour bus
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- MG unveils new MG3 - Britain's cheapest full-hybrid car
- German car giant BMW has released the X2 and it has gone electric!
- Mini unveil an electrified version of their popular Countryman
- Steve McQueen featured driving famous stunt car in 'The Hunter'
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- How to invest to beat tax raids and make more of your money
- BMW meets Swarovski and releases BMW i7 Crystal Headlights Iconic Glow
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- Iconic Dodge Charger goes electric as company unveils its Daytona
- Investors to vote on plans to double London Stock...
- WH Smith shares 'more for patient money than fast bucks',...
- BHP swoops on rival Anglo American in £31bn mining megadeal
- Barclays profits hit by subdued mortgage lending and...
- Sainsbury's enjoys food sales boost months after...
- Unilever sales jump as consumer giant eases price hikes
- Car insurers to make pay monthly cheaper and fairer after...
- BUSINESS LIVE: Barclays profits slip; Sainsbury's ups...
- Meta announces it is to plough billions into artificial...
- Tory windfall tax war 'is killing off North Sea oil'......
- AstraZeneca lifted by blockbuster oncology drug sales
- MARKET REPORT: Reckitt cleans up but Footsie gives up gains
- Tesla shares rocket after pledge to bring forward launch...
- Boeing burns through £1bn a month to contain 737 safety...
- Schroders boss Peter Harrison to retire in 2025 after...
- Windfall tax is driving UK oil and gas producers to...
- Lloyds cheers green shoots in housing market - but takes...
- Ten stocks to invest in NOW to profit from Rishi's...