Direct Line Insurance Group Plc has rejected a £3.3 billion (US$4.2 billion) acquisition proposal from Aviva Plc, marking the second time this year it has rebuffed a suitor.
Aviva’s offer valued Direct Line at approximately 250 pence per share, a 58% premium to the insurer’s closing share price on the same day.
In a statement, Direct Line confirmed it received the unsolicited and conditional offer on November 19, 2024. The terms included 112.5 pence in cash and 0.282 new Aviva shares for every Direct Line share.
Direct Line’s board, after reviewing the offer with its advisers, unanimously rejected the proposal on 26 November.
In a statement, the board described the bid as “opportunistic” and claimed it undervalued the company’s standalone potential. The company said it remains confident in the strategy set by its new leadership team, which it expects to deliver growth in profitability, capital generation, and shareholder returns.
The board reiterated that the offer did not reflect the value it believes Direct Line could achieve independently. It also noted that there is no certainty a formal offer will follow or what terms it might include.
Under UK takeover rules, Aviva has until 5 pm on December 25, 2024 to either make a firm offer or announce its withdrawal. This deadline can be extended with the approval of the UK’s Takeover Panel.
Aviva, which has gained 13% in share value this year and is valued at £13.1 billion, has resumed acquisition activity under chief executive officer Amanda Blanc. The insurer has been exploring opportunities to expand its UK footprint after slimming down through divestments.
In March, Aviva acquired Probitas, a Lloyd’s insurance market participant, for £242 million. It also agreed last year to buy AIG Life Ltd, the UK protection business of Corebridge Financial Inc, for £460 million.
Aviva has been reportedly assessing Direct Line’s competitor Esure Group Plc, which specialises in home and motor insurance and is backed by Bain Capital. Aviva’s potential interest in these acquisitions signals its focus on strengthening its position in the UK market.
This is not the first time Direct Line has rebuffed a takeover proposal in 2024. Earlier this year, the insurer declined a bid from Belgian competitor Ageas, which valued it at around £3.2 billion.
As part of its turnaround strategy, Direct Line recently announced plans to cut approximately 550 jobs to save £50 million in costs next year.
Headquartered in Bromley, England, Direct Line provides a range of insurance products under brands including Churchill, Green Flag, Privilege, Darwin Motor Insurance, and its flagship Direct Line brand. Its offerings span motor, home, travel, pet, life, and business insurance.
Shares of Direct Line have fallen 13% this year, leaving the company with a market capitalisation of around £2.1 billion.
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