UPDATE: Aviva To Raise EUR1.2 Billion From Delta Lloyd In IPO Test
October 19 2009 - 4:40AM
Dow Jones News
Aviva PLC (AV.LN) Monday said it plans to raise a gross sum of
about EUR1.2 billion by floating 42% of its Dutch financial
services unit Delta Lloyd NV - less than some analysts had expected
but reflecting the deal's test of market appetite in what will be
the largest initial public offering in Europe so far this year.
Shares in the U.K. insurer at 0745 GMT were unchanged at 450
pence. The stock is up 15% since the start of 2009 and has gained
almost 28% over the last year.
Aviva said it's offering institutional and retail investors 42%
of Delta Lloyd, or around 63.5 million ordinary shares at
EUR15.50-EUR19 each, with an over-allotment option of up to 6.35
million more. The final offer price will be determined through a
book-building process.
The shares are expected to start trading in Amsterdam on the
Euronext exchange Nov. 3.
Aviva two weeks ago confirmed it was floating Delta Lloyd - the
only major Dutch insurer that didn't need a government bail-out in
the financial crisis - in order to free up capital for possible
acquisitions or otherwise take advantage of growth opportunities.
Aviva will keep 57% of Delta Lloyd shares and 53% of voting
rights.
A Dutch charity holds the 8% of Delta Lloyd shares not currently
owned by Aviva.
Aviva Chief Executive Andrew Moss said: "The IPO of Delta Lloyd
is another important development in the delivery of the strategy we
laid out in 2007. This step, which will be the largest IPO in
Western Europe this year, will free up capital for us to use
elsewhere and will give us the option of exploring further growth
opportunities."
Panmure Gordon analyst Barrie Cornes, with a buy rating on
Aviva, said Aviva's valuation of the business at EUR2.6
billion-EUR3.1 billion suggests a discount of as much as 35% on its
embedded value, and "may raise eyebrows." But he and other analysts
said the transaction is positive for Aviva since the U.K. insurer
didn't have full control over the 92%-owned subsidiary, and because
of the possible gains that could come from future acquisitions.
Oriel Securities said the price range on the offered shares
suggests they are "priced to go," and kept a buy rating on
Aviva.
The deal will test interest in Europe's IPO market after a year
of subdued activity, and had been expected to come at a discount to
ensure its success. According to data provider Dealogic, just
EUR635 million was raised in 43 transactions in the first nine
months of 2009, compared with EUR12 billion in 194 offerings in the
same period of 2008. In the comparable 2007 time frame, when
markets were booming, EUR54 billion was raised from 413
transactions.
The lead banks handling the Delta Lloyd IPO are Bank of
America/Merrill Lynch, Goldman Sachs, JPMorgan, Morgan Stanley and
Royal Bank of Scotland.
Meanwhile, in a Delta Lloyd trading update included with the
statement, Aviva said the company's life new business sales for the
first nine months were GBP2.8 billion, down 12% from a year
earlier. The decline was due mainly to lower corporate pension
business in 2009 compared with 2008 and was partly offset by the
inclusion of sales from Swiss Life Belgium acquired in June
2008.
General insurance premiums for the third quarter of 2009 were
ahead of the same period in 2008, the company said.
Delta Lloyd made a net loss for the first nine months of GBP88
million (EUR100 million), Aviva said.
However, the solvency of Delta Lloyd's insurance and banking
operations both increased in the three months to Sep. 30, it
said.
Company Web site: http://www.aviva.com
-By Digby Larner and Margot Patrick, Dow Jones Newswires; +33 1
4017 1748; digby.larner@dowjones.com