Aviva’s £5.6bn merger with Friends Life will cost around 1,500 jobs as part of a plan to generate savings of £225m from the combined operation by 2017.
Friends Life employs 3,700 people in the UK, with its largest operation in Bristol, and smaller offices in Dorking. Aviva refused to specify which locations or roles would be hardest hit. Aviva employs 16,000 people in the UK, with around 5,000 in its York and Sheffield-based life and pensions business.
An Aviva spokesperson said: ”Aviva expects to deliver approximately £225m of annual savings by the end of 2017. This may result in a reduction of approximately 1,500 roles from across the enlarged Aviva Group of approximately 31,500 people. We appreciate that this news may be disconcerting for employees and we would look to ensure that any redundancies are kept to a minimum wherever possible, by using vacancies and natural turnover, for example.
“At this stage, no specific teams, roles or locations have been identified as the proposed transaction has not completed. When we are clearer on this, following completion of the deal, we will fully engage and consult with employees and their representative bodies.”
The £5.6bn merger – the biggest insurance company deal in the UK since the merger of CGU and Norwich Union in 2000 which ultimately created Aviva – was first revealed in November, with the management claiming it will increase cash flow and dividends.
At the time, one high-profile critics said the merger was “like two guys on a foggy night huddling together for comfort” following the collapse in sales of annuities. But major institutions have thrown their weight behind the deal, which is now expected to be approved at a shareholder meeting on 26 March. The formal completion of the deal will then be on 13 April.
“This acquisition is financially and strategically compelling. It will increase our cash flows, reduce our leverage and support continued growth in our dividend. It also secures our leadership position in our home market and gives greater flexibility to drive growth in other parts of the Aviva group,” said Aviva.
Under the deal, Aviva will acquire the entire ordinary share capital of Friends, leaving Friends shareholders with 26% of the merged company. Aviva’s share price fell sharply from 539p to 464p in the weeks after the deal was announced, but has since recovered to around 510p. Friends Life saw its shares jump from 340p before the deal was revealed to around 385p this week.
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