Reports emerged on Tuesday that Europe’s largest activist investor Cevian has built up a 5% stake in Aviva (AV.), the UK-listed insurer, and plans to push for greater cost cuts and a return of up to £5 billion cash to investors.
Aviva saw its share price rally more than 3% in response to 424.87p as investors piled in on hopes that a hefty lump sum could be up for grabs. But how much cash might this actually see individual investors get for each share they own?
To work this out we need to find out how many shares Aviva has in the market, then divide the cash return figure by those shares in issue. Declarations show that Aviva had 3,929,319,641 ordinary shares in circulation at the end of May 2021.
5,000,000,000 (implied cash return)
3,929,319,641 (shares in issue)
= 127p per share (approximately)
At the current share price, that would imply a rough 30% yield. However, on the assumption the cash return did happen, investors need to remember that the share price would almost certainly fall by an equivalent 127p amount in the short-term since that cash would no longer be in the business.
FASTER CHANGE DEMANDED
Cevian is heaping the pressure on new Aviva chief executive Amanda Blanc to speed up the process of streamlining the business and make improvements to how the insurer is run.
Aviva, which has sold eight businesses since the appointment of Blanc in July 2020, said last month it had raised £7.5 billion from asset disposals and planned to return money to shareholders, but resisted putting a figure on its cash return plans.
In a statement, Cevian said that it saw scope for deeper cost-cutting worth at least £500 million by 2023. Aviva outlined a strategy last year including £300 million in cost cuts by 2022. Cevian believes the Aviva share price could hit 800p within three years and more than double its dividend to 45p per share.
