Direct Line agrees £3.7bn Aviva takeover ahead of Christmas deadline
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Aviva has finally struck a deal to acquire fellow insurer Direct Line for £3.7billion, ahead of Christmas Day deadline. Britain's largest life insurer made a £3.3billion approach in November, but Direct Line turned this down on the grounds that it 'substantially undervalued' the company.
Having had until 5pm on Christmas Day to agree a concrete proposal, Direct Line's board said it would support the higher bid. It has now accepted an offer whereby Direct Line investors will receive 0.2867 new Aviva shares, 129.7 pence in cash and a dividend of up to 5p per share for every Direct Line share they hold.
This represents a 73.5 per cent premium to Direct Line's closing share price on 27 November, the last day prior to the offer period starting. Once the deal is finalised, Aviva investors will own about 87.5 per cent of the enlarged business, while Direct Line shareholders will hold the remaining 12.5 per cent.
Thumbs up: Direct Line has accepted a £3.7billion offer from fellow insurer Aviva. Aviva believes the takeover will bolster its presence in the UK personal lines market, which generated at least £26billion of gross written premiums last year. The FTSE 100 group also expects it to create 'better outcomes' for customers, such as competitive pricing, greater technology investment and faster claims payments.