National Australia Bank will become the country's biggest life insurer and investment platform provider after buying Aviva Australia Holdings for $825 million.
NAB bought the business from the UK's Aviva, the world's fifth biggest insurer, beating three other final bidders.
Excluding integration costs, Aviva Australia would add to earnings and return on equity from the first full year following the acquisition, Melbourne-based NAB said in a statement on Monday.
"This acquisition will enhance our offering in key wealth management segments including insurance and investment platforms, adding scale, efficiency and new capabilities to our operations," NAB Chief Executive Cameron Clyne said in a statement.
"Our MLC and NAB wealth management business is a key area of growth for us."
NAB will leapfrog life insurance market leader Commonwealth Bank and number two provider ING to become the biggest in the country.
NAB also will be the biggest investment platform provider, over rivals such as Westpac, after buying Aviva's Navigator.
NAB's Aviva takeover, which is subject to approval of the Australian Competition and Consumer Commission, is part of Mr Clyne's refocus on the Australian market as he seeks to reverse the bank's slide in profitability and return to shareholders.
Shares in NAB had gained 18 cents, or 0.81 per cent, to $22.28 as of 8.48am.
The shares have recovered 39 per cent since the 12-year low $16.03 on March 9, but are still half the value of the record high $44.84 of November 2007.
Prior to completion of the transaction, Aviva Australia will pay a $40 million dividend to its parent and a further $60 million as a net asset adjustment.
NAB said that, based on the estimated Tier 1 equity at completion, the acquisition would result in an approximate 15 basis point decrease in Tier 1 capital on a pro forma basis.
Aviva Asia-Pacific chief executive Simon Machell said the sale of Aviva Australia to NAB was a good result, showing how strong the Australian market was despite the global financial crisis.
"The sale process attracted very strong interest from leading Australian players," Mr Machell said.
"Any of the top five players in the life and/or wealth management sectors could gain instant market leadership by buying Aviva."
Mr Machell said Aviva sent sale offers to 15 companies with four bidders in the final phase.
The sale price was equivalent to about 16 times 2008 earnings, and would allow the group to focus on other markets in Asia such as China and India, where returns would be higher, he said.
"It (Aviva Australia) would be more valuable in the hands of a larger local participant, particularly in a consolidating industry where scale matters," Mr Machell said.
AAP
