Phoenix Group Holdings PLC (LSE:PHNX) is reported to be weighing a move for Aegon UK, where UBS analysts see a strong strategic and financial logic behind a potential deal.
Aegon announced last week it would explore a divestment of its UK business, triggering speculation about potential buyers.
UBS says Phoenix is a “logical contender”, citing synergies in workplace pensions, financial advice, and legacy business consolidation.
The deal could double Phoenix’s workplace assets under administration (AUA) to around £135 billion, while also accelerating its expansion into in-house financial advice.
Aegon UK’s sizable legacy book also plays into Phoenix’s strength in extracting operational efficiencies from closed life books.
Financially, UBS estimates the acquisition could deliver £175 million in annual pre-tax cost savings and a £100 million capital diversification benefit.
Two acquisition scenarios, with valuations of £2 billion and £2.5 billion, suggest Phoenix could improve leverage ratios, though solvency levels may dip post-deal.
Still, UBS estimates the deal could yield double-digit returns, with an internal rate of return above 12% under the lower valuation.
The Swiss bank maintains a 'neutral' rating on Phoenix with a price target of 670p, noting the group will need to weigh returns against other capital allocation priorities.