Aviva set to buy Direct Line as insurance giant prepares sweetened £3.6bn deal
Share:
Direct Line is set to back a sweetened £3.6billion takeover by Aviva valuing it at almost 75 per cent above its previous share price, after the insurance giant’s first offer was rejected. It told shareholders on Friday its board would recommend a cash-and-share offer valuing Direct Line at 275p per share should Aviva make a formal offer, having turned down the Aviva's ‘highly opportunistic’ bid of 250p per share last week.
The bid comprises 129.7p in cash, 0.2867 new Aviva shares and dividend payments of ‘up to’ 5p per Direct Line share in aggregate, reflecting a mammoth 73.3 per cent premium to its pre-offer closing share price on 27 November. The pair have already come to a preliminary agreement on the deal, which would see Direct Line shareholders would own approximately 12.5 per cent of the enlarged group.
But Aviva must formalise the offer by 25 December or walk away. The Direct Line board says it is ‘confident’ in the firm’s prospects as a standalone business, and continues to have conviction in its leadership and strategy. Aviva sweetens takeover offer for Direct Line.
However, Direct Line says the potential offer ‘is at a value that it would be minded to recommend’. It marks the third bid for the insurer in less than 12 months, with Direct Line having successfully fended off a takeover attempt by Belgian rival Ageas earlier this year.
