Briefing Note and Friends Life to Merge

Volume 14 / Issue 131 December 2014

Aviva, the largest general insurer in the UK and The offer also needs to be approved by antitrust and a leading life and pensions provider, has just regulatory authorities and is expected to be finalised in announced it has agreed to purchase Friends the middle of 2015. Life in a deal worth £5.6bn. If the deal goes Comment through, holders of Friends Life shares will On the one hand, it’s disappointing that following any receive 0.74 new Aviva shares for each Friends merger there would be one less player in the market and Life share they hold. Friends Life shareholders therefore less choice for consumers, but we would expect will end up with about 26% of the shareholding to see opportunities of scale associated with the larger of the enlarged Aviva group. group and further significant investment in the combined Company’s workplace benefits proposition to provide Both Friends Life and Aviva are no strangers to added value for customers. mergers. Friends Life was formed in 2011 after the amalgamation of Friends Provident, the Shareholders can expect that the combined group would majority of UK Life and Bupa Health have: Assurance. Aviva was created by a merger of • higher cash flows enhanced by substantial synergies, two British firms, Union and principally through operating efficiencies in the CGU Plc (itself created by the 1998 merger of combined back books and the removal of overlapping and General Accident) as overheads; and • increased financial and strategic flexibility to support CGNU in 2000. In July 2002, CGNU changed further growth of Aviva’s dividends. its name to Aviva. We are eager to understand more about how the merger The merged business will have around 16 would affect the operational procedures and future million customers, about 1 in 4 households. proposition developments of the enlarged group and we are already in dialogue with Friends Life and Aviva.

What happens now? We will be staying close to our contacts at both The offer now needs to be approved by shareholders of companies over the coming months and any key both businesses. Shareholders will have an opportunity messages will be communicated to clients, who will to vote on the proposed acquisition at a general meeting. obviously be keen to know more about the effect on the Shareholders will be written to with details of the general arrangements they have in place with both companies. meeting and how to vote in due course. In the meantime, we do not believe there is currently any Aviva has already indicated that its general meeting will need to do anything other than keep abreast of events. probably be in March 2015 with the scheme document, The message at the moment is that it’s business as usual prospectus and circular (including notice of the general for clients, but watch this space. meeting) expected to be published in the second half of

January 2015.

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