Direct Line rejects £3.3bn takeover proposal from Aviva

Aviva offered 112.5p per share in cash and 0.282 new Aviva share, valuing the group at 250p per share. This is a 59.7% premium to the closing Direct Line share price on 18 November, which was the day before the proposal was submitted.

Direct Line dismissed the offer as "highly opportunistic", saying that it "substantially undervalued the company".

"The board has considerable conviction in the capabilities of our newly established leadership team and stands firmly behind their delivery of our strategy," it said. "Under this strategy, the company continues to make early progress towards our financial targets, and expects to deliver attractive growth in profitability, capital generation and shareholder returns."

The proposal was unanimously rejected by the board of Direct line on Wednesday.

In a separate statement, Aviva said that Direct Line had "declined to engage further" since rejecting the offer.

It said: "Aviva believes that an acquisition of Direct Line would be consistent with its strategy to accelerate growth in its UK businesses and further pivot the group towards capital-light business lines.

"The acquisition would expand Aviva's presence in the attractive UK Personal Lines market, building on its existing strength, and creating a more efficient platform from which to serve existing and new customers. In addition, the acquisition would allow Direct Line customers to benefit from Aviva's breadth, scale and financial strength."

Aviva said a deal would deliver "attractive" returns for both its and Direct Line shareholders, including unlocking value that is inaccessible to Direct Line standalone.

"Aviva believes that the acquisition would deliver material cost and capital synergies, incremental to Direct Line's existing cost savings programme," it added.

In March, Direct Line said it was confident in its standalone prospects after Belgium’s Ageas announced it would not be making an offer for the insurer following two failed attempts at engaging with the board.

On 28 February, Direct Line said it had rejected a £3.1bn offer from Ageas. This comprised 100p in cash and one new Ageas share for every 25.24 Direct Line shares, and implied a value of 233p per share.

On 13 March, the insurer said it had received and rejected a second takeover approach received on 9 March, at 120p a share in cash and one new Ageas share for every 28.41 Direct Line shares. It had an implied value of 237p a share.