Direct Line to Finally Accept Aviva Takeover Bid

By Evans Momodu
2 minute read


Direct Line, one of the UK's largest insurers, appears poised to accept a revised £3.61 billion takeover bid from Aviva, the nation's biggest insurer.

The proposal represents a 73.3% premium on Direct Line's valuation as of November 18, the day before the initial offer was made.

Aviva’s earlier £3.3 billion offer was rejected by Direct Line as "highly opportunistic" and undervaluing the company.

This latest proposal has led Direct Line's board, after consultations with shareholders and advisors, to signal its willingness to recommend the deal if a formal offer is made.

A merger would create an insurance powerhouse, commanding about 20% of the UK motor insurance market. The companies said the deal could generate "significant synergies" and create more value as a combined entity than as separate firms. However, Aviva has until December 25 to finalise its decision to make a firm offer or withdraw.

Direct Line’s stock surged by 40% following the initial takeover interest, but the company has faced challenges in the motor insurance market, including rising claims costs and competition from digital-first competitors. Earlier this year, Direct Line fended off a £3.17 billion acquisition attempt by Belgian insurer Ageas.

As part of efforts to improve profitability, Direct Line announced plans to cut 550 jobs and reduce costs by £50 million.

If the deal with Aviva proceeds, it would mark a significant consolidation in the UK insurance industry, with implications for competition and market dynamics.
Source: Sky news