27th Nov 2024 19:29
(Alliance News) - Aviva PLC on Wednesday said it had made an approach to buy Direct Line Insurance Group PLC, which had been rejected.
London-based Aviva said the cash and shares proposal was made last Tuesday. Direct Line shareholders would be entitled to receive 112.5 pence per share in cash, and 0.282 new Aviva shares per Direct Line share.
Based on Aviva's share price on the day before the proposal was submitted, the plan valued Direct Line at 250p per share or around GBP3.26 billion.
Aviva said it was a "highly attractive" and compelling" offer with "high execution certainty", which also met Aviva's strict financial criteria for acquisitions.
But Aviva said Direct Line on Tuesday had rejected the proposal as substantially undervaluing Direct Line, and has declined to engage further with Aviva.
In a statement, Direct Line, the Bromley, England-based motor and home financial services group, said it had concluded that the plan was "highly opportunistic and substantially undervalued the company."
"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," Direct Line stated.
In March, Ageas AG withdrew a proposed bid for Direct Line after failing to secure the backing of its UK peer.
The Belgian insurer had made two proposals to buy Direct Line, but its advances were rejected. The two approaches valued each share in Direct Line at 233p and 239p per share respectively.
Direct Line rejected both, describing them as "uncertain" and "unattractive", significantly undervaluing its future prospects.
Direct Line has undertaken a strategic revamp under the stewardship of Chief Executive Adam Winslow, who the firm poached from potential suitor Aviva.
Aviva believes the acquisition 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. In addition, the acquisition would allow Direct Line customers to benefit from Aviva's breadth, scale and financial strength.
Further, a deal would deliver "material cost and capital synergies, incremental to Direct Line's existing cost savings programme, Aviva stated.
Aviva said it remains committed to delivering growing dividends and sustainable capital returns to its shareholders.
Aviva closed 1.6% higher at 489.50 pence on Wednesday. Direct Line closed 0.2% lower at 158.70p.
By Jeremy Cutler, Alliance News reporter
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