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Aviva Plc, Britains second-biggest insurance company by market value, has agreed to acquire Friends Life in an all-stock deal, marking the biggest takeover in 15 years among UK insurers.

Aviva, which last month announced it was in talks with its smaller rival, values each Friends Life share at 0.74 new Aviva shares, or 394 pence, 15% more than the companys closing price on November 20.

The final agreement, approved by both companies boards, overall matches the preliminary terms announced on November 21 and it would allow Aviva to tap into Friends Lifes cash flow to accelerate future dividend growth, said CEO Mark Wilson.

Avivas shares dropped 7.4% since the deal was first announced as analysts opinions on the agreement differed, with a part of them criticizing Mr. Wilson for focusing on the UK rather than expanding elsewhere.

Should the deal be completed, Friends Life shareholders will also be entitled to receive, in place of Friends Life’s 2014 final dividend, a second interim dividend of 24.1 pence per share, resulting in a full-year dividend of 31.15 pence a share.

Aviva said it plans to pay a final 2014 dividend of 12.25 pence per share, up 30% compared to last years full dividend. The company also said the acquisition would be broadly neutral to Avivas operating earnings per share “once full run-rate synergies are achieved” referring to the projected cost savings of £225 million each year by 2017.

After the deal is done, Andy Briggs, CEO of Friends Life will be appointed to chief executive of Aviva UK Life and join the Aviva Plc board, while Malcolm Williamson, a chairman at Friends Life, would become a senior independent director at Avivas board. Aviva will also consider bringing a number of non-executive directors to join the expanded board.

“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, “ said Mr. Wilson.

The new company, 26% owned by Friends Lifes shareholders, would have a market value of around £19.88 billion, based on their current market capitalizations.

Aviva Plc lost 1.69% on Monday and closed at GBX 499.40 in London. The stock gained 2.72% on Tuesday to trade at GBX 513.00 at 10:34 GMT, marking a one-year change of 17.73%. The company is valued at £14.72 billion. According to the Financial Times, the 17 analysts offering 12-month price targets for Aviva Plc have a median target of GBX 545.00, with a high estimate of GBX 650.00 and a low estimate of GBX 443.00. The median estimate represents a 9.13% increase from the last close price of GBX 499.40.

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