Aviva, the life insurer, has confirmed plans to raise nearly £1bn from the flotation of its Dutch subsidiary Delta Lloyd on to the Amsterdam Stock Exchange.
The company is expected to publish a prospectus for the listing this month with the flotation targeted for next month, assuming market conditions remain favourable.
The insurer first mooted the possibility of a flotation in August along with its interim results, saying it wanted to release capital to strengthen its balance sheet and allow it to exploit opportunities in other markets, which could lead to acquisitions. The company also said such a move would free up Delta Lloyd to pursue growth in the Benelux region.
The sell-off had not been expected until next year, but the recent recovery in world markets has given Aviva the confidence to go ahead.
Sources close to the company have sought to play down expectations of the size of the cash boost which some analysts have said they believe could reach £1.3bn. A more likely number is €1bn – around £910m at current exchange rates.
Delta-Lloyd has proved a frustrating business for Aviva given that Dutch corporate governance rules do not give it full control over the subsidiary. The company owns all the shares but only 92 per cent of the voting rights, a result of an arrangement with a charitable trust. This means it has only two directors on the board and is not in full control of future strategy, which has led to disagreements.
Further share sales could follow a successful flotation, potentially providing Aviva with yet more capital to pursue its ambitions in faster-growing markets around the world. Delta Lloyd's regulatory value currently stands at around £3.7bn.
Aviva now has a formidable war chest should it want to pursue deals following the sale of its Australian life and pensions operations to National Australia Bank. The company also cut its dividend by 31 per cent with the aim of conserving capital.
The life insurer said yesterday: "For Aviva, an IPO would bring the flexibility to pursue balance sheet restructuring opportunities or to explore other opportunities for growth.
"Aviva would also benefit from the enhanced value and liquidity of the retained stake."
It added: "Delta Lloyd would benefit from a new shareholder base supportive of the company's growth ambitions in the Benelux region, and a public listing would help to better position Delta Lloyd ahead of anticipated consolidation in the Netherlands and Belgium."
The governments of those countries are expected to pursue sell-offs of insurers taken into state hands as a result of the banking crisis and its effect on businesses such as ABN Amro and Fortis.
However, the fall-out has left observers believing that there are considerable opportunities for healthy companies to exploit.
Surge in flotations predicted: Big names set to join market
After several lean years on the London markets, companies are set to target stock market listings with a vengeance in 2010, raising billions of pounds.
This summer, just two UK companies listed, raising £100m. But the data provider Thomson Reuters said that 11 initial public offerings are in the pipeline for next year already, raising over £2.4bn. Experts believe that the interest in flotations out there could drive the actual figure to 10 times that. Pets At Home has confirmed its intention to float, while Betfair Group, Virgin Active and New Look are expected to join the market.
David Wilkinson, UK head of IPO initiatives at Ernst & Young, said: "We expect an increase in new issue activity in the first half of next year, with significant private equity-backed companies coming to market."