- Retail investors can vote this week on proposals concerning four preference shares
- Life insurance giant is proposing cancellation, albeit this time at a more generous price than in 2018, when it offered par
- The company has offered a premium for each of the Aviva and General Accident plc preference shares
- Investors can vote by 3 April to make their voice heard and choose between a capital gain now or a long-term future income stream
“After 2018’s failed attempt to buy back and cancel £450 million in preference shares, life insurance giant Aviva is having another go via a tender offer for which it is seeking approval at a General Meeting on 15 April,” says AJ Bell Investment Director Russ Mould.
“Investors who wish to frustrate this plan for a second time and retain the flow of income from the instruments, instead of potentially banking a capital gain on their investment, can cast their vote by 3 April and make their voice heard at the General Meeting which will take place on 15 April.
“The furore in 2018 came at a time when many shareholders were still smarting from a dividend cut sanctioned shortly after the arrival of then chief executive Mark Wilson in 2013.
“Holders of the preference shares were also irked by Aviva’s attempts to buy back the four separate preference shares at par value of £1 apiece. That prompted a collapse in the value of the instruments and forced Aviva to offer a payment to those who sold, in an attempt to try and smooth over the row.
“Aviva’s current chief executive Amanda Blanc is in the midst of a substantial overhaul of the company, which has seen it sell overseas assets and focus on its UK operations, cut costs and launch a £3.7 billion bid for Direct Line.
Source: LSEG Refinitiv data
“Aviva’s share price stands at a ten-year high thanks to this plan, which has also enabled the company to run nearly £5 billion in share buyback programmes and increase its annual dividend five times in a row since Amanda Blanc took over as CEO in March 2020.
Source: Company accounts
“In this respect, the company and its boss carry more goodwill than Mr Wilson did seven years ago, and Aviva is also being cannier this time around when it comes to the price it has offered to the holders of the four preference shares.
“Aviva has offered a premium to the market price for each of the two Aviva plc prefs and each of the two General Accident plc prefs, and much more than their par value.
“Subsequent price action suggests that institutional shareholders may be inclined to take the money on offer, but retail investors and private holders still have a chance to cast a vote and make their voice heard.
Source: LSEG Refinitiv data
“Before they do so, retail holders will have to weigh up the potential benefits of the cash in hand, and any capital gains generated by the tender offer, against the loss of the long-term income they would have accrued in the form of the generous coupons provided by the preference shares.
“Some holders may be relying upon those coupons to help them manage their future cash flows, while others will have to consider the tax implications of the transaction and the rates of tax that may apply to the capital gain and the potential future income, especially if they hold the prefs outside a tax-advantaged vehicle such as an ISA or a pension.
“The decision is therefore not a straightforward one, but holders of the prefs could be forgiven for feeling frustrated by this second attempt to buy and then cancel them, especially since they are officially ‘irredeemable’ preference shares. Holders could therefore expect, quite fairly, to have the chance to bank the coupons in perpetuity and plan their finances accordingly.
“They should, in theory, benefit handsomely if Ms. Blanc’s turnaround of Aviva continues to go to plan, as the firm should be cash generative as a result and thus more than capable of paying the coupons. Instead, they may feel caught up in the turnaround, rather than buoyed by it, as Aviva seeks to cancel this expensive form of funding.
“If holders approve cancellation, all of the preference shares will be retired.
“If they do not, then Avia will run a tender offer and give eligible holders of the preference shares the opportunity to sell some or all of their position.”
Source: Company accounts
What options do shareholders have?
Preference shareholders have the following options with regards to the tender offer and meetings:
- Take No Action
- Tender shares and vote FOR the proposed cancellation resolution at the General and Advisory meetings.
- Do not tender shares but vote FOR the proposed cancellation resolution at the General and Advisory meetings.
- Do not tender shares but vote AGAINST the proposed cancellation resolution at the General and Advisory meetings.
- Do not tender shares but vote WITHHOLD the proposed cancellation resolution at the General and Advisory meetings.
Shareholders who elect to tender their shares will automatically have deemed to vote for the proposed cancellation resolution.
Who will be eligible to receive the Voting Fee?
Preference shareholders will be entitled to receive a voting fee per preference share if:
- they elect to tender their preference shares for purchase, meaning they automatically appoint the chair as their proxy to vote in favour of the resolutions.
Or
- they do not tender their shares but submit a voting only instruction, voting for or against the resolution.
Shareholders who take no action will not be entitled to the voting fee.
The Voting Fee will not be paid if the cancellation is not approved.
What happens if the Cancellation Resolution is passed?
If the Cancellation is approved at the meetings, all preference shares will be cancelled.
The Tender Offer will no longer proceed, and no shares will be bought under that process.
Shareholders will receive a Cash Payment (Cancellation Amount) in exchange for their preference shares.
Shareholders who had elected to tender their shares or voted For or Against the cancellation resolution will also receive a Voting Fee (please see each event for full terms).
Aviva Preference Shares:
Last Date to Trade: 14 May 2025 (expected).
Effective Date of Cancellation: 14 May 2025.
De-listing from the London Stock Exchange: 15 May 2025.
General Accident Preference shares:
Last Date to Trade: 5 June 2025 (expected).
Effective Date of Cancellation: 6 June 2025.
De-listing from the London Stock Exchange: 9 June 2025.
What happens if the Cancellation Resolution is NOT passed?
If the cancellation is NOT passed, the cancellation will not proceed, but the Tender Offer may still go ahead (if the Tender Offer resolution is passed at the General Meeting).
The Tender Offer Settlement Date is expected on 2 May 2025.
If the cancellation resolution is not passed, the shares will continue to trade as usual.
Links:
Further documents relating to the offer, cancellation and meetings can be found here:
https://clients.dfkingltd.com/avivapreference/preference-shareholder/documents/
