Insurance Australia Group has revealed it is close to completing the takeover of the Australasian arm of Aviva.
The £651m acquisition merges Australia's leading and fourth largest insurers, increasing IAG group's gross written premium (GWP) by 58% to £1.9bn. Aviva's shares gained 12p to 494p, as it stressed it was retaining its long-term operations in Australia.
Richard Harvey, Aviva chief executive, said: "This is an excellent deal for Aviva's shareholders. We assessed IAG's approach from a perspective of creating shareholder value. The price is equivalent to 6 per cent of our market capitalisation."
IAG plans to raise a £354m in ordinary equity through a share placement to institutional investors, a share purchase plan and an underwritten dividend reinvestment plan.
IAG Chief executive Michael Hawker said: "The acquisition would enhance the group in its home base and contribute significantly to Insurance Australia's aspirational goal of doubling GWP by 2007."
Hawker added: "The remainder of the purchase price is expected to be funded by hybrid equity and debt issues to be undertaken over the next six months."
The acquisition is subject to regulatory approvals, including financial regulators, in Australia and New Zealand.
