Aviva is considering absorbing parts of Friends Life’s Asia operations, which the takeover target planned to sell, when the insurance group completes the £5.3bn acquisition of its FTSE 100 rival.
Friends had appointed Goldman Sachs to handle the sale of FPI, estimated to be worth about £450m, and planned on naming the buyer within weeks, people familiar with the matter said.
However, Aviva’s chief executive Mark Wilson told investors this week that it was interested in keeping parts of FPI, which sells life assurance and investment products to expatriates and the wealthy.
Although directors of Aviva and Friends agreed this week on the terms of the pair’s tie-up, no decision has yet been taken on the fate of FPI.
It is unclear how good a fit FPI, which also has an offshore investment arm based in the Isle of Man, would be for Aviva.
The all-share purchase of Friends by Aviva is the largest deal between two UK companies in six years. Hundreds of jobs are at risk after Aviva set out a plan this week to generate £225m in annual cost savings at the enlarged group.
One of the City’s most influential fund managers said on Friday he believed the deal could result in “massive synergies”, which over time could be “materially higher” than £225m a year.
Richard Buxton, head of UK Equities at Old Mutual — one of Friends’ 10 largest shareholders, which also owns shares in Aviva — said he was supportive of the deal as it would benefit both companies.
The combination will create an insurance, savings and investment powerhouse in the pair’s domestic market. Retaining parts of FPI, which administers more than £7bn on behalf of about 300,000 clients, would also bulk up Aviva’s presence in Asia.
Mr Wilson, who previously ran pan-Asia insurer AIA, is keen on expanding Aviva’s business in Asia — a small part of the group, but its fastest growing — particularly in China and southeast Asia.
He has hired several former colleagues from AIA, including Chris Wei, who runs Aviva’s global life business, and Khor Hock Seng, chief executive of the group’s Asia business.
Last week Aviva launched a joint venture in Indonesia with the conglomerate Astra.
£450m
Friends had appointed Goldman Sachs to handle the sale of FPI, estimated to be worth about £450m
People familiar with the matter said FPI’s operations in Hong Kong and Singapore could prove complementary to Aviva’s but those in Dubai and Isle of Man less so.
“Chris [Wei] is very interested in parts of it because it rounds out parts of our offer in Asia,” Mr Wilson said at a briefing in the City this week. “We have some time to look at it, make the right call.”
The enlarged group will still be less valuable than Aviva’s rival Prudential, the UK’s largest insurance group by market capitalisation, whose business in southeast Asia has expanded rapidly.
The Pru is led by Tidjane Thiam, who clashed with Mr Wilson during his failed attempt to buy AIA.