By Daisy Ku
LONDON, Oct 18 (Reuters) - British insurer Aviva is to offer shares in Delta Lloyd at a discount, sources familiar with the matter said on Sunday, giving the Dutch unit a market value of about 3 billion euros ($4.5 billion).
The group, which aims to list 30 to 40 percent of Delta Lloyd, is likely to receive between 1 billion and 1.3 billion euros from the initial public offering (IPO), the sources said, expecting the market debut on Nov. 2.
'There are a lot of other offerings. Delta Lloyd is competing with some large rights issues; it needs to have a discount,' said one source.
The offering will be at around 0.7 to 0.75 times the market consistent embedded value (MCEV) of the Dutch unit, the sources said, referring to a measure of the value of an insurance portfolio commonly used in the industry.
Delta Lloyd's MCEV, which measures the value of the shareholders' interest in the in-force portfolios using market prices, stood at 4.1 billion euros as of June 30.
Based on those values, Aviva will need to sell closer to 40 percent of the unit to raise the targeted money.
Aviva is to announce Delta Lloyd's price range on Monday and start a two-week bookbuilding process, handled by bookrunners Bank of America Merrill Lynch, Goldman Sachs, J.P.Morgan and RBS.
VALUATION
Delta Lloyd's deal could compete with UK banking group Lloyds' rights issues of more than 11 billion pounds ($17.9 billion) should Britain's financial watchdogs approve the plan.
Fund managers said they would invest in Delta Lloyd if the deal offered a 10 to 20 percent discount to its adjusted embedded value of 3.3 to 3.4 billion euros.
'We are interested in Delta Lloyd. But a market value of 3 billion euros would top what we are preparing to pay,' said a London-based fund manager.
'It has to be priced attractively,' he added.
The fund managers use a slightly different calculation of embedded value, a concept that makes a large range of assumptions, for instance about future mortality rates and interest rates.
At a market valuation of about 3 billion euros, Delta Lloyd shares would be offered at an 8 to 15 percent discount to the adjusted embedded value.
That would make it cheaper than, for instance, Legal and General, which trades at about 0.9-0.95 times of its embedded value.
The insurer is also expected to offer a dividend yield of 4 to 5 percent, making it more attractive to pension funds.
(Editing by Will Waterman)
($1=.6702 Euro) Keywords: DELTALLOYD/IPO (daisy.ku@thomsonreuters.com; +44 207 542 5106; Reuters Messaging: daisy.kureuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
LONDON, Oct 18 (Reuters) - British insurer Aviva is to offer shares in Delta Lloyd at a discount, sources familiar with the matter said on Sunday, giving the Dutch unit a market value of about 3 billion euros ($4.5 billion).
The group, which aims to list 30 to 40 percent of Delta Lloyd, is likely to receive between 1 billion and 1.3 billion euros from the initial public offering (IPO), the sources said, expecting the market debut on Nov. 2.
'There are a lot of other offerings. Delta Lloyd is competing with some large rights issues; it needs to have a discount,' said one source.
The offering will be at around 0.7 to 0.75 times the market consistent embedded value (MCEV) of the Dutch unit, the sources said, referring to a measure of the value of an insurance portfolio commonly used in the industry.
Delta Lloyd's MCEV, which measures the value of the shareholders' interest in the in-force portfolios using market prices, stood at 4.1 billion euros as of June 30.
Based on those values, Aviva will need to sell closer to 40 percent of the unit to raise the targeted money.
Aviva is to announce Delta Lloyd's price range on Monday and start a two-week bookbuilding process, handled by bookrunners Bank of America Merrill Lynch, Goldman Sachs, J.P.Morgan and RBS.
VALUATION
Delta Lloyd's deal could compete with UK banking group Lloyds' rights issues of more than 11 billion pounds ($17.9 billion) should Britain's financial watchdogs approve the plan.
Fund managers said they would invest in Delta Lloyd if the deal offered a 10 to 20 percent discount to its adjusted embedded value of 3.3 to 3.4 billion euros.
'We are interested in Delta Lloyd. But a market value of 3 billion euros would top what we are preparing to pay,' said a London-based fund manager.
'It has to be priced attractively,' he added.
The fund managers use a slightly different calculation of embedded value, a concept that makes a large range of assumptions, for instance about future mortality rates and interest rates.
At a market valuation of about 3 billion euros, Delta Lloyd shares would be offered at an 8 to 15 percent discount to the adjusted embedded value.
That would make it cheaper than, for instance, Legal and General, which trades at about 0.9-0.95 times of its embedded value.
The insurer is also expected to offer a dividend yield of 4 to 5 percent, making it more attractive to pension funds.
(Editing by Will Waterman)
($1=.6702 Euro) Keywords: DELTALLOYD/IPO (daisy.ku@thomsonreuters.com; +44 207 542 5106; Reuters Messaging: daisy.kureuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
