Aviva sells Spanish stake for €287 million

British multinational insurance company Aviva plc announced on Friday it had sold its stake in CxG Aviva for €287 million (£226 million, $368 million) to Galicia-based Novacaixagalicia Banco SA in a cash transaction following the green light from a Spanish Tribunal.

CxG Aviva was a joint venture between Aviva plc and Novacaixagalicia Banco SA (NCG).

The transaction follows the approval of the deal by the Arbitration Tribunal in Madrid on Friday.

The Spanish Tribunal ruled that NCG Banco had breached a shareholder agreement with Aviva after Caixa Nova and Caixa Galicia merged into NCG Banco in 2010. NCG Banco had agreed to sell insurance exclusively through CxG Aviva.

Aviva had initiated the arbitration in October 2012.

The deal is expected to be completed by the end of 2014, the two companies said on Friday. It represents a multiple of 25 times CxG Aviva’s operating earnings in 2013.

In a bid to improve shareholder returns, the London-based insurer is cutting costs and selling off peripheral assets.

Aviva

David McMillan says it is a good outcome for Aviva.

According to Aviva, the cash proceeds will increase its liquidity by £226 million ($368 million), which will be used for general corporate purposes. The company’s IFRS (International Financial Reporting Standards) net asset value will be increased by about 4 pence per share and economic capital surplus by nearly £200 million ($330 million) as at HY 2014.

CEO of Aviva Europe, David McMillan, said:

“This is a good outcome for Aviva which reflects the strong agreements we have in place. We remain focused on maximising returns from our Spanish business in a recovering economy, where we have strong partnerships with leading regional banks, as well as agency and broker distribution.”

After the news became public, Aviva’s share price rose 0.8% on the London Stock Exchange on Friday to 538.0 pence.

Luis Beraza, head of NGC Banco’s Spanish operations, said:

The decision of the Arbitration Tribunal provides direct control to integrate, under the new management model, ABANCA (NCG Banco) marketing life insurance policies and pensions, a key segment in our bank-assurance business.” (“La decisión de la Corte de Arbitraje nos proporciona el control directo para integrar bajo el nuevo modelo de gestión de ABANCA la comercialización de pólizas de vida y pensiones, un segmento clave en nuestro negocio de bancaseguros.”)