Aviva has reached a preliminary deal to acquire U.K. property and casualty insurer Direct Line Insurance Group plc for £3.51 bn.
Both companies disclosed the financial details of the potential acquisition, which involves Aviva purchasing Direct Line’s entire share capital.
The proposal values Direct Line shares at 275 pence each. This includes 129.7 pence per share in cash, funded through Aviva’s internal cash resources. Additionally, Direct Line shareholders would receive 0.2867 new Aviva shares for each Direct Line share, plus dividend payments of up to 5 pence per share, subject to Direct Line’s board approval before deal completion.
The £3.51 bn price reflects a 73.3% premium on Direct Line’s Nov. 27 closing share price and a 49.7% premium on the six-month volume-weighted average share price up to Nov. 27.
Direct Line’s board stated it remains confident in the company’s standalone prospects and its new leadership’s ability to execute the announced strategy. However, after consulting advisers and shareholders, the board acknowledged that the proposal’s value could warrant recommending it to shareholders if a formal offer is made. This recommendation depends on final agreement of all terms and the completion of reciprocal due diligence.
If the deal proceeds, Direct Line shareholders would hold about 12.5% of Aviva’s enlarged share capital.
Direct Line’s board believes the proposal offers shareholders significant value, including potential synergies from the merger. Aviva stated that the strategic and financial rationale for the acquisition is strong.
The deal remains subject to preconditions, such as confirmatory due diligence. Aviva can waive these conditions at its discretion.
Aviva has until Dec. 25 to announce a firm offer or withdraw its intention to bid. The deadline can only be extended with the approval of a takeover panel.
Earlier in 2024, Belgian insurer Ageas had also shown interest in acquiring Direct Line, with offers reportedly around €3.1 billion. However, these discussions did not result in a transaction.
Direct Line continues to focus on its core insurance operations, leveraging its strong brand portfolio to serve a diverse customer base across the UK.
Direct Line Insurance Group plc, established in 1985, is among the UK’s leading insurance providers. The company operates several well-known brands, including Direct Line, Churchill, Privilege, Darwin, and Green Flag. These brands offer a wide range of general insurance products, such as motor, home, commercial, travel, pet, and rescue services.
Direct Line serves millions of customers across the UK, providing insurance solutions through direct channels and price comparison websites. The company employs over 9,000 people and maintains a strong presence in the personal and small business insurance markets.
