Insurer Direct Line, a major employer in Glasgow, has rejected a £3.3 billion takeover bid approach from sector stablemate Aviva, it has emerged tonight.
Aviva revealed after the stock market closed that it had made a bid approach to Direct Line.
The regulatory news service announcement from Aviva was swiftly followed by one from Direct Line, which described the takeover approach as “highly opportunistic” and declared that it “substantially undervalued” the business.
Aviva said: “In response to press speculation, Aviva announces that on 19 November 2024, it submitted a non-binding proposal to the board of Direct Line Insurance Group plc regarding a possible offer to acquire 100% of Direct Line.
“Given Aviva's desire to reach a swift conclusion and to minimise distraction for both companies, Aviva presented a highly attractive proposal with high execution certainty, which also met Aviva's strict financial criteria for acquisitions. Aviva communicated to Direct Line that it believed this proposal represented a highly compelling offer and that it was designed to encourage prompt engagement to commence the work needed to reach an offer announcement under Rule 2.7 of the Code (City Code on Takeovers and Mergers) as soon as possible.”
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It added that, under the terms of this proposal, Direct Line shareholders would be entitled to receive 112.5 pence per Direct Line share in cash, funded through Aviva's internally available cash resources, and 0.282 new Aviva shares per Direct Line share.
Aviva noted this represents a premium of 55.9% to the one-month, volume-weighted average Direct Line share price to November 27.
It said: “Aviva believes that an acquisition of Direct Line would be consistent with its strategy to accelerate growth in its UK businesses and further pivot the group towards capital-light business lines.
“The acquisition would expand Aviva's presence in the attractive UK personal lines market, building on its existing strength, and creating a more efficient platform from which to serve existing and new customers. In addition, the acquisition would allow Direct Line customers to benefit from Aviva's breadth, scale and financial strength.”
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Direct Line said: “The board considered the proposal with its advisers and concluded that it was highly opportunistic and substantially undervalued the company.”
It added: “The board has considerable conviction in the capabilities of our newly established leadership team and stands firmly behind their delivery of our strategy. Under this strategy, the company continues to make early progress towards our financial targets, and expects to deliver attractive growth in profitability, capital generation and shareholder returns.
“As such, the board considered the proposal to not reflect the standalone value that can be delivered by the company, and hence considered the possible offer highly opportunistic in nature. Accordingly, the board unanimously rejected the proposal on 26 November 2024.”
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