Direct Line shares spike as board agrees to higher Aviva offer
By Frank Prenesti
Date: Friday 06 Dec 2024
(Sharecast News) - Shares in Direct Line spiked on Friday after the UK insurer said it was ready to accept an increased offer from rival Aviva of 275p a share, valuing the company at £3.6bn.
Direct Line last week rejected a 250p cash and share offer. Shares in the company were up 8% in early London trade.
The company reiterated that it was confident of its prospects as a standalone operation, but after considering the new offer with advisers and consulting with shareholders it decided the latest bid was at a value that it could recommend acceptance.
Direct Line shareholders would own approximately 12.5% of the issued and to be issued share capital of Aviva. The Direct Line board believes that, in addition to the attractive headline value per share, the combination would provide the opportunity to deliver significant synergies, creating substantial additional value for both sets of shareholders," the company said in a statement.
Aviva has until 1700 GMT on Christmas Day to make a firm offer under UK takeover rules.
"Aviva had no choice but to dig deeper if it wanted to secure Direct Line. Low and behold, the offer has been raised to a much more realistic level to get the deal done," said AJ Bell analyst Dan Coatsworth.
"Offering 275p per share amounts to a generous 73.3% bid premium, implying that it is paying a fair price based on current and future prospects. A cash bid at this price would have been the sweetest of deals, but as it stands an all-share deal is the next best thing."
"The next test is to see if shareholders push for more. Judging by recent City chatter, 275p should be enough to keep everyone happy and Aviva might be able to wrap this up fairly quickly."
"Aviva has performed every step of the takeover dance flawlessly. It's spotted a rival going through a weak phase and thrown its hat into the ring as an interested buyer with a low-ball price to test the water. It will have almost certainly known the first bid would have been rejected and it's now come back with a higher and fairer offer, and Direct Line's board has indicated it's good enough."
Reporting by Frank Prenesti for Sharecast.com
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