Aviva backs away from hostile Prudential bid

Norwich Union owner Aviva said today it was unwilling to table a hostile bid for Prudential despite having a £17bn (€24.5bn) proposal knocked back by its rival’s board.

Shares in the Pru rocketed by more than 12% to stand above the 708p level that Aviva was willing to pay in an all-share deal as investors pinned their hopes on a higher bid by its UK rival or the entry of European competitors such as Axa into the fray.

A combination of the Pru and Aviva would create the world’s fifth largest insurer.

Aviva approached its rival on Thursday but saw its overtures rejected by directors of the Pru who refused to enter talks.

Outlining its terms today, Aviva boss Richard Harvey said there was “a compelling strategic, financial and operational logic” for a tie-up but his company was only prepared to proceed with its proposal on a recommended basis.

“This is a real opportunity to create a leading player in the global savings, investments and insurance market,” Mr Harvey said.

“The group would have a significant presence and growth opportunities in Europe, Asia and the United States. This is a value-creating proposition for the shareholders of both companies.”

Around 42% of operating profits of the combined group would be made in the UK, with 28% coming from Europe, 17% from North America and 10% in Asia.