NAB To Acquire Aviva Australian Wealth Management Unit

Post by NeilMc on June 22, 2009 · Under Business News, Life Insurance, Mergers & Acquistions, Wealth Management, banking, insurance · Comment

Australian banking major National Australia Bank (NAB) announced on Monday a deal to acquire the Australian wealth management division of insurance giant Aviva for $825 million.

The acquisition should contribute to earnings per share and the lenders return on equity within the first year after acquisition according to an official statement released by NAB.

Aviva’s Australian wealth management unit will first pay a $40 million dividend and then a net asset adjustment of $60 million once the deal vests resulting in a total sale price of $925 million.

Aviva Australia Holdings will become a wholly owned subsidiary on NAB, and the deal includes Norwich Union Life, strategic equity stakes in four independent financial advisory firms and the Navigator investment platform.

Aviva, Britain’s largest insurer said the deal would not include Aviva’s assets management business nor its interest in PIH financial advisory business.

“This acquisition will enhance our offering in key wealth management segments including insurance and investment platforms, adding scale, efficiency and new capabilities to our operations,” NAB chief executive Officer Cameron Clyne said.

NAB said the cost of the acquisition was at a lower PE multiple then comparables such as AMP and AXA Asia Pacific, and that its closely watched tier one capital ratio was be reduced by about 15 basis points as a consequence of the deal.

Aviva said it jettisoned the unit as part of strategy of selling of non core assets and focusing instead of key markets in Asia which can deliver growth such as in China and India, where it has ambitions to become a leading player.

“The decision to sell these businesses is based on the belief that it would be challenging to reach a leading position in Australia in the foreseeable future in an increasingly consolidated market,” Aviva said.

The insurer’s Australian life insurance business ranks ninth in Australia, whilst its wealth management business ranks eighth according to Aviva.

“It gives us greater financial flexibility and we can redeploy the capital to other markets which we believe will deliver better returns to our shareholders over the next few years,” Aviva chief executive Andrew Moss said.

The transaction price represented 16 times 2008 net earnings, Aviva said.

Aviva’s Australian business earned $60.7 million in the year ending December 31 2007, which represented a 37 per cent decline from $96.2 million the previous year. Last year Aviva plc reported a full year loss of $1.9 billion.

The insurance giant said it intends to hold on to its Australian asset management business.

“As a global asset management business Aviva Investors remains committed to the Australian market where it is focused on building its external funds under management, benefiting from the growth of the pensions market,” Aviva said.

The business had about 350,000 customers at December 31, with NAB having to compete with rivals including AMP and Macquarie Group for the prize,.

The business saw a 24 per cent reduction in life and pension sales during the first quarter, which was largely as a result of a product withdrawal.

The sale subject to regulatory approval was managed by Morgan Stanley and JPMorgan Chase & Co, and is expected to be completed during the fourth quarter of this year.

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