The UK’s Competition and Markets Authority (CMA) has confirmed that it will not escalate Aviva Plc’s proposed acquisition of Direct Line Insurance Group Plc to a phase two investigation, effectively allowing the deal to proceed.
Aviva is seeking to acquire Direct Line for approximately £3.7 billion ($5.09 billion) in a mega-merger that is expected to significantly expand its presence in the motor insurance sector.
In a statement, the CMA said that based on currently available information, the merger would not be referred for a more in-depth probe. The regulator added that the full text of its decision will be published as soon as is reasonably practicable.
According to prior analysis by Bloomberg Intelligence, the acquisition could potentially double Aviva’s share of the UK motor insurance market.
In addition to clearance from the CMA, the proposed transaction has received approvals from several other regulatory bodies. These include the Financial Conduct Authority, the Prudential Regulation Authority, and the Solicitors Regulation Authority.
Meanwhile, as part of post-deal integration planning, Direct Line’s CEO Adam Winslow and CFO Jane Poole are expected to exit their roles. Aviva has indicated that further changes to Direct Line’s leadership and board structure will follow.
Aviva has also previously stated it will incur approximately £250 million in one-off integration costs to bring Direct Line into its operations. The company anticipates generating annual pre-tax cost synergies of at least £125 million by the end of the third year following completion.
The workforce will also be affected by the integration. Aviva and Direct Line plan to reduce their combined headcount by 5–7% over a three-year period. This equates to between 1,600 and 2,300 jobs, although the final figure may be lower due to natural attrition and unfilled vacancies.
Following the combination, the merged group is expected to hold more than 20% of the UK motor insurance market. This would place Aviva ahead of Admiral, which currently leads the segment.
While the corporate structure will undergo changes, Aviva previously said that it plans to retain Direct Line's core consumer brands. These include the flagship Direct Line brand, as well as Churchill and Green Flag.
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