Aviva ‘more likely to engage in M&A than be a target’, says analyst
Aviva is unlikely to be a takeover target, despite reports of a potential deal to buy the firm last week, according to an analyst.
Last Friday, it was reported in The Times that Allianz, Intact Financial and Tyrg were interested in acquiring Aviva, and, though, the news was unconfirmed, the company’s share price rose 10 per cent after it hit the wires.
The insurance giant was also linked to acquiring RSA’s personal lines business for around £500m on the same day.
But Deutsche Bank analyst Rhea Shah said she believed Aviva was “more likely to engage in M&A than be a target”.
“We see a deal for the whole entity as nearly impossible, and even a sale of certain parts as unlikely given the work management has undertaken in reshaping the business”, Shah said.
Deutsche Bank was also sceptical about Allianz looking at Aviva because it already built a position in UK non-life in recent years and “overweighting the UK would not make sense”.
“Additionally, whilst Allianz has the resources, we believe shareholders would prefer to see more balance split between bolt-on acquisitions and excess capital returns”, the bank added.
Aviva has gone through a large restructuring over the last four years, shedding non-core international assets and acquiring domestic assets to grow its market share.
This is why the deal to acquire RSA’s UK personal/consumer business “could make sense”, according to UBS analysts, adding it could strengthen Aviva’s top position in the UK non-life insurance market.
The analysts at UBS also pointed out that Aviva could fund the acquisition internally “given its strong holding of company cash”.
A price tag of £500m has been given to the RSA deal which Deutsche Bank said “is expensive” and believes shareholders would “much prefer to see some of the proceeds from the SingLife sale be returned to them instead of being used on M&A.”
In September, Aviva sold its stake in Singlife for £800m.