Christmas bid battle brewing for Direct Line after the insurer rejects shock £3.3bn takeover offer from rival Aviva

By JOHN-PAUL FORD ROJAS

Up to date: 17:03 EST, 28 November 2024

Direct Line shares soared yesterday after a shock £3.3billion takeover supply from rival Aviva raised the prospect of a Yuletide bidding battle for the troubled insurer.

The inventory soared by 41.4 per cent, or 65.7p, to 224.4p, an eight-month excessive, as merchants reacted to the disclosure that it had rejected an method.

One investor mentioned Aviva could need to go as much as £3.9billion to get the deal over the road amid hypothesis that Belgian insurer Ageas, a earlier suitor, may re-enter the fray.

Aviva is now straight contacting shareholders in an obvious try and pave the best way for a hostile takeover.

It got here as a flurry of deal exercise engulfed the Metropolis, with cafe bar group Loungers accepting a £338million supply from US funding group Fortress and waste administration agency Renewi succumbing to a £701million bid from Australian financial institution Macquarie.

‘Takeover exercise was red-hot on the UK market,’ mentioned Dan Coatsworth, funding analyst at AJ Bell.

Direct Line inventory soared by 41% after the insurer, led by boss Adam Winslow, (proper) had rejected an method from rival Aviva, led by Amanda Blanc (left

Aviva’s 250p-a-share supply, comprising a mixture of money and inventory, was disclosed late on Wednesday.

That was at a premium of almost 60 per cent to Direct Line’s share worth. Aviva mentioned it was ‘extremely enticing’ however Direct Line mentioned it was ‘extremely opportunistic and considerably undervalued the corporate’.

Underneath ‘put up or shut up’ takeover guidelines, Aviva now has till 5pm on Christmas Day to announce a agency bid or stroll away. Aviva mentioned that after the rejection of its supply this week, Direct Line had ‘declined to interact additional’ with it.

Nevertheless, it emerged that Aviva chair George Culmer met Direct Line chair Danuta Grey to debate the supply, showing to recommend that the latter was open to a deal of some kind.

Yesterday, Direct Line’s administration was in talks with shareholders. Some, together with Redwheel and Schroders, are additionally main buyers in Aviva.

One top-20 shareholder within the goal firm advised the Monetary Occasions that almost all buyers would most likely settle for a bid at 300p. Analysts at funding financial institution KBW additionally prompt Aviva may make a 300p valuation.

Analysts at Peel Hunt put a decrease goal on it, suggesting that if Aviva was capable of ‘sweeten the deal’ to one thing like 250p-265p which will ‘assist fulfill’ the Direct Line board.

‘They mentioned that struggling Direct Line’s turnaround path could show ‘bumpier than anticipated’, including that exploring Aviva’s supply ‘in additional element would make sense in our view’.

Aviva’s method is the second takeover supply that Direct Line boss Adam Winslow has needed to take care of since taking up this spring. It rejected a 239p-a-share method from Ageas in March.

Analysts at Barclays yesterday prompt Ageas may now come again. ‘In our latest conversations with Ageas administration, the CEO has reiterated strategic curiosity to the UK private traces (residence and motor) market, together with Direct Line as a becoming asset, though clearly ruling out a hostile method,’ they mentioned in a observe.

Matt Britzman, senior fairness analyst at Hargreaves Lansdown, mentioned Direct Line was ‘enjoying laborious to get once more’.

He added: ‘There’s a case to be made that Aviva is a greater suitor, given it already shares markets with Direct Line within the UK, but it surely’ll have to up its recreation, and supply, if it needs Direct Line to take the proposal critically.’

‘Dangerous blood between them’

Amanda Blanc’s audacious try and snap up Direct Line pits her towards an ex-colleague as soon as described as insurance coverage ‘royalty’.

It’s mentioned there isn’t any love misplaced between Aviva boss Blanc, 57, and Adam Winslow, 45, who leads the smaller insurer. ‘There’s dangerous blood between them,’ mentioned a Metropolis supply.

Blanc, who grew up within the coronary heart of south Wales’s mining nation, was Winslow’s boss at Aviva for 3 years earlier than he was appointed chief govt of Direct Line.

Winslow is the son of Peter Winslow, the previous boss of BGL group, which launched comparethemarket.com, the value comparability web site which helped to rework the trade.

Winslow’s appointment at troubled Direct Line was introduced in August final yr but it surely was not till March that he was capable of begin.

His title was relegated to an afterthought when Aviva introduced his successor’s appointment.

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