Aviva has launched an audacious £3.3billion bid to purchase troubled rival Direct Line.
The FTSE 100 insurance coverage large, led by Amanda Blanc, revealed final night time that it tabled a suggestion for its smaller competitor value 250p a share.
That was properly above the 158.7p Direct Line shares had been buying and selling at yesterday, valuing it at £2.1billion.
However the supply was rejected by the Direct Line board – setting the scene for a takeover battle between now and Christmas.
The proposal from Blanc and her group supplied Direct Line buyers 112.5p in money and 0.282 Aviva shares for every share they maintain in Direct Line.
Collectively, it was a near-60 per cent premium to the insurer’s closing value the day earlier than the bid was introduced.
Swoop: Aviva boss Amanda BlanAviva has launched an audacious £3.3bn bid to purchase troubled rival Direct Line
However Direct Line branded Aviva’s supply ‘extremely opportunistic’ and mentioned it ‘considerably undervalued the corporate’.
Below Metropolis takeover guidelines, Aviva now has till 5pm on Christmas Day to determine whether or not it needs to make a proper supply for Direct Line or stroll away.
The tussle might result in a hostile bid, the place Aviva go on to Direct Line shareholders and ask them to help the takeover in opposition to the needs of its administration.
It’s the second bid for the insurer in lower than 12 months, with Direct Line having efficiently fended off a takeover try by Belgian rival Ageas earlier this 12 months.
The group suffered embarrassment in August when it revealed an accounting blunder that led to its monetary energy being reported as larger than was truly the case.
Aviva’s swoop got here simply weeks after Direct Line’s boss Adam Winslow, who took over originally of March, introduced that the enterprise was chopping 550 jobs as a part of a £100million cost-saving programme to revive its fortunes.
The cuts, representing 5 per cent of the beleaguered insurance coverage agency’s workforce, had been introduced because the group revealed that it had misplaced 71,000 own-brand motor insurance coverage prospects within the newest quarter. Direct Line has been pushing via value hikes as the price of insurance coverage claims has soared.
However this has sparked an exodus of its own-brand motor insurance coverage prospects, with the whole quantity falling to simply over 3m within the third quarter of this 12 months.
Winslow’s technique to develop buyer numbers includes making Direct Line insurance coverage accessible on value comparability web sites for the primary time, reversing years of resistance to the transfer below earlier bosses.
However his efforts have thus far didn’t yield outcomes for buyers, with Direct Line’s share value having slumped almost 24 per cent since he arrived on the enterprise.
Direct Line’s management have even misplaced the help of its founder Sir Peter Wooden, an insurance coverage tycoon who arrange the enterprise because the UK’s first telephone-only insurer in 1985.
Wooden, 78, instructed The Mail on Sunday in March that the group had been managed ‘terribly’ for years, making it a sitting duck for predators.
He mentioned it must be bought to a bidder providing a ‘respectable’ value.
Sir Peter added that the corporate had been run ‘so abysmally for thus lengthy’ that it deserved to be taken over by a competitor.
In contrast, Aviva has seen its share value energy forward, rising almost 13 per cent thus far this 12 months. They gained 1.6 per cent yesterday, closing at 489.3p.
It has left Blanc attempting to find acquisition targets.
Final 12 months, the group snapped up AIG Life for £460million and in March entered the Lloyd’s insurance coverage market with a £242million deal to purchase underwriter Probitas.
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