In a significant move that will reshape Britain’s insurance landscape, Aviva has announced plans to acquire Direct Line for £3.7 billion, creating one of the UK’s largest motor insurance providers. The deal, which values Direct Line shares at 275p, represents a substantial 73.3 per cent premium over the company’s closing price before negotiations began in November.
The acquisition, scheduled for completion by mid-2025, is expected to result in approximately 2,000 job redundancies as the combined organisation seeks to achieve £125 million in cost savings. Direct Line’s chairwoman, Danuta Gray, has endorsed the deal, highlighting its significant value for shareholders and acknowledging the company’s strong market position.
Dame Amanda Blanc, Aviva’s chief executive, emphasised the strategic importance of the merger, noting that it aligns with the company’s focus on capital-light business growth. The consolidation will position the merged entity as a direct competitor to Admiral in the motor insurance sector whilst strengthening Aviva’s existing dominance in home insurance.
The deal structure includes both cash and stock components, with Direct Line shareholders receiving 0.2867 new Aviva shares, 129.7p in cash, and potential dividend payments of up to 5p. Upon completion, Aviva will hold an 87.5 per cent stake in the enlarged group.
This strategic move follows Aviva’s recent portfolio restructuring, which has seen the company divest eight overseas businesses since 2020, including operations in Italy, France, and Asia. The acquisition comes after Direct Line’s vulnerability to takeover bids increased following profit warnings in 2022 and 2023, attributed to rising motor insurance claims.
Market response to the announcement has been positive, with Aviva’s shares rising 1.1 per cent to 462½p and Direct Line’s stock increasing 3.8 per cent to 252½p. The combined entity is projected to deliver earnings per share growth of approximately 10 per cent once cost-saving targets are achieved.
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