The boards of Aviva and Friends Life have reached agreement on the terms of a recommended all-share acquisition of Friends Life by Aviva.

Under the terms of the proposed acquisition, holders of Friends Life shares will receive 0.74 new Aviva shares for each Friends Life share they hold. Friends Life Shareholders would own around 26% of the issued ordinary share capital of the enlarged Aviva Group.

It is anticipated that Andy Briggs, the current group chief executive of Friends Life, will become chief executive officer of Aviva UK Life and will join the board of Aviva as an executive director.

Shortly after the scheme becomes effective, it is expected that Sir Malcolm Williamson, the current chairman of Friends Life, will join the board of Aviva as senior independent director and it is anticipated that a further non-executive director of Friends Life will join the board of Aviva.

John McFarlane, chairman of Aviva, said: “Aviva’s recent success and sound growth and return prospects already present a compelling investment proposition and enable us to advance our strategy through acquisition as well as organic growth.

“The proposed acquisition not only consolidates Aviva’s leading position which Aviva has established in the UK, it is expected to enable a much stronger dividend flow and balance sheet position than would otherwise have been possible. It also offers Friends Life Shareholders an attractive outcome.

“This move enhances, and is consistent with, our investment proposition of ‘cash flow plus growth’, and I commend it to shareholders.”

Mark Wilson, CEO of Aviva, added: “This acquisition is financially and strategically compelling. It is one of those rare transactions where the two organisations fit with surgical precision, building on each other’s strengths and addressing the challenges.

“Consistent with our investment thesis of cash flow plus growth, this transaction will increase our cash flows and reduce our leverage and support continued growth in our dividend. It secures our leadership position in our home market and gives greater flexibility to drive growth in other parts of the Aviva group.

“This is good for shareholders and customers alike who will benefit from being part of a stronger, more diversified and resilient business with a wide range of products.”