National Australia acquires Aviva units

Monday 22nd June 2009

National Australia Bank, that nation’s third-biggest lender, agreed to acquire the Australian wealth management and insurance units of the UK’s Aviva Plc for A$825 million, as part of its strategy to boost non-bank income.

The announcement ends months of speculation about the Australian operations of Aviva, which has cut its work force after posting a 2008 loss that reflected a drop in the value of fixed income investments. National Australia was vying with insurer AMP for the assets, Reuters reported last month, citing people familiar with the discussions.

The bank’s MLC and NAB wealth management business “is a key area of growth for us and we are well positioned to respond to changes currently taking place in the wealth management market as a result of the financial crisis and regulatory reviews,” chief executive Cameron Clyne said in a statement. The acquisitions add “scale, efficiency and new capabilities.”

Shares of National Australia rose 0.8% to A$22.28 after a trading halt was lifted, and have gained 5.9% this year. The new businesses will add to earnings in the first year, before integration costs, and lift return on equity, it said. Aviva Plc will receive a A$40 million dividend from the Australian unit prior to the transaction.

National Australia will get Aviva’s Norwich Union Life unit and its Navigator investment platform as part of the transaction.

Shares of the UK insurance group gained 5.8% to 336.75 pence on Friday. In the past three months they have surged 54%, after sinking to a low in March. The deal will net a total of A$925 million including accounting adjustments to asset prices, it said.

National Australia said the acquisition will result in a 15 basis points drop in its Tier 1 ratio on a pro forma basis, from 8.45%.

Businesswire.co.nz

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