Direct Line Insurance Group PLC announced Friday it has accepted an enhanced £3.6 billion ($4.6 billion) takeover bid from Aviva, signaling potential consolidation in the U.K. insurance sector. However, the deal remains contingent on Aviva making a formal offer by Dec. 25, in compliance with U.K. listing rules.
Details of the Improved Offer
Aviva’s revised proposal includes 129.7 pence per share in cash, financed through its reserves, and 0.2867 new Aviva shares for each Direct Line share. Shareholders will also receive a dividend of 5 pence per share ahead of the deal’s completion. The total offer, equivalent to 275 pence per Direct Line share, represents a 10% increase over Aviva’s initial late-November bid of 250 pence per share, which valued the FTSE-250 company at £3.3 billion.
The latest offer is a 73.3% premium on Direct Line’s closing share price on Nov. 27, the day before Aviva disclosed its interest.
Direct Line’s Response
Initially rejecting Aviva’s earlier bid as undervaluing its assets and growth potential, Direct Line now appears more receptive. In a joint statement, Direct Line indicated its board, after consulting shareholders, is inclined to recommend the revised offer, noting the “strategic and financial logic” of the combination.
