London: Insurer Aviva said it was on course to float part of its Dutch unit Delta Lloyd next month in a sale that could reopen the market for European initial public offerings after a drought of more than a year.
Britain’s second-biggest insurance player aims to raise between €1 billion and 1.6 billion ($1.5-2.3 billion) by selling 30 to 40% of Delta Lloyd, two sources close the matter said on Monday.
The company said it expected to sell less than half its 92% Delta stake on Euronext’s Amsterdam exchange in November, allowing it to reduce debt and grow further, possibly through acquisitions.
“For Aviva, an IPO would bring the flexibility to pursue balance sheet restructuring opportunities or to explore other opportunities for growth,” Aviva said in a statement.
A €1.6 billion IPO would be the region’s biggest since New World Resources’ $2.5 billion float in May 2008, Thomson Reuters data showed.
It would be Europe’s biggest so far this year, and the fifth-largest globally, including Spanish bank Santander’s planned spin-off of its Brazilian unit.
Aviva chief executive Andrew Moss said in August that Aviva was on the lookout for takeovers, and that Delta Lloyd might also make acquisitions as the Benelux financial services sector undergoes a wave of consolidation.
“We think that Aviva could use the proceeds and/or its paper to provide Resolution with competition for undervalued life/asset management operations,” Panmure Gordon analyst Barrie Cornes wrote in a note. British takeover vehicle Resolution, bought life insurer Friends Provident for £1.8 billion ($2.86 billion) in August.
The Delta Lloyd IPO, first announced by Aviva in August, will also bring Dutch investors on to Delta Lloyd’s shareholder register, giving it more chance to buy assets in the Netherlands.
Delta Lloyd will kick-start the bookbuilding process for the IPO in the week of 19 October, with its market debut expected in early November, sources said.
Bookrunners Bank of America of Merrill Lynch, Goldman Sachs , JPMorgan and RBS are likely to share an underwriting fee of close to three percent to the deal value, the sources said.
Delta Lloyd chief executive Niek Hoek told Reuters last month that the IPO was pencilled in for the final quarter of 2009 or early next year. Delta Lloyd had an embedded value — a measure of insurance companies’ worth which includes the present value of future earnings from long-term life insurance contracts — of €4.1 billion at the end of June, Aviva said on Monday.
Aviva shares were down 1.8% at 444.3 pence by 1001 GMT, while the FTSE 100 share index was flat.