Synergies from Aviva-Friends Life deal could be 'substantial', says The Share Centre

The proposed tie-up between insurance groups Aviva and Friends Life Group could create "substantial synergies", according to The Share Centre, details of which still remain unknown.

The companies announced after the close on Friday that they had agreed on terms for a possible all-share combination. Friends Life shareholders would get 0.74 Aviva shares for each Friends Life share they own, valuing Friends Life at 398.9p per share or £5.6bn.

Sheridan Admans, investment research manager at The Share Centre, said: “Should the deal happen analysts believe synergies would be substantial, with Aviva’s balance sheet benefiting as would its pensions and protection operations. Friends Life investors should benefit from improved growth prospects."

However, she warned that the merger is still "not a done deal".

"Friends Life investors may push for a higher premium or other interested parties may show their hand, however the latter is assumed to be unlikely given the size of the deal and the implication that may pose."

Due to the merger activity, The Share Centre has downgraded its rating on Aviva to 'hold' until more details are released, but said that any weakness in the share price might by a good entry point for potential investors given the positive long-term outlook.

Friends Life is also rated a 'hold'.