Aviva Warns Investors of "Scam" Targeting Shareholders with Low-Ball Offer

Aviva has issued a warning to its retail investors regarding a "mini-tender offer" from U.S. investment firm Litani, which seeks to acquire the insurer's shares at a price substantially below their market value. The firm has targeted approximately 100,000 of Aviva's small shareholders with an offer to buy shares for £5.30 each, a price considerably lower than the previous day's closing price of £6.55.

This type of offer, described by one source as a "worrying development," is reportedly the first of its kind in the UK. While such offers do not require explicit permission from the Financial Conduct Authority (FCA) in the UK, the U.S. Securities and Exchange Commission has previously cautioned about the potential for mini-tender offers to mislead investors. Aviva has taken legal action in an attempt to prevent Litani from contacting its shareholders, asserting that the offer is not in their best interests.

Litani, described as an arbitrage firm, has secured a High Court ruling allowing it access to Aviva's shareholder register. Last year, a judge acknowledged that Litani's scheme, which targets shareholders of demutualized firms to acquire their shares at a discount before reselling them, presented an "economically disadvantageous" offer. However, the judge did not find the offer to be "commercially exploitative, oppressive or immoral."

Aviva, led by chief executive Amanda Blanc, has itself communicated with retail investors to advise them against accepting Litani's offer. The insurer's communication stressed that Litani is not affiliated with Aviva. A City insider characterized the firm's actions as preying on "vulnerable elderly retail shareholders" and called the scheme a "total and utter scam."

Litani's "Offer Circular" reportedly details its plan to buy up to one million shares on a first-come, first-served basis, with the offer set to expire on January 29 of the following year. The circular highlights the offer price being below the stock market valuation but suggests selling to Litani as a "convenient way to sell your shares" without commission or dealing charges.

Aviva, which has a retail shareholder base of around 500,000, was formed through various mergers, including the absorption of the former mutual society Norwich Union. Following demutualization, members received shares. Efforts to reach Litani for comment were unsuccessful. The FCA was also contacted for a statement.