UK's Aviva eyes 17 bln stg bid for Prudential-FT

LONDON, Mar 18 (Reuters) Aviva, Britain's biggest insurer, has made a takeover approach to Prudential Plc that could value its smaller rival at 17 billion pounds (.84 billion), according to the Financial Times newspaper.

Aviva was understood to have approached Prudential, Britain's second-largest listed life insurer, on Thursday with an all-share offer thought to be pitched at about 700 pence per share, the newspaper said in an unsourced report on Saturday.

A Prudential spokesman said he had no comment while Aviva officials were not immediately available for comment.

Shares in Prudential ended 7.1 per cent higher at 672-1/2 pence on Friday, valuing the company at around 16.1 billion pounds.

Aviva climbed 2.8 per cent to 850-1/2 pence as takeover speculation swept the UK insurance sector. The two companies have been the subject of long-standing merger speculation.

The talk resurfaced on Friday when JP Morgan analyst Gordon Aitken said the UK government might back a big UK insurer and a combination of Aviva and Prudential would make a good geographic fit. But he said limited overlap would result in limited cost savings.

Prudential is seen as a prime takeover target because of its presence in 12 Asian countries and its small but profitable U.S.

business.

When the company unveiled its full-year results on Jan. 25 showing insurance sales had risen 15 per cent in 2005, Chief Executive Mark Tucker refused to comment on media speculation that Aviva might be keen on a bid, insisting Prudential could thrive on its own.

''We believe there is a tremendous upside in our business and that we have an independent future,'' he said at the time.

Aviva meanwhile has often been touted by analysts and traders as a possible buyer of Prudential although its management has so far favoured joint venture distribution deals with banks to grow its life business.

The Financial Times report said an approach for Prudential could flush out a rival bidder with French insurer AXA seen as being interested in the company.

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