British insurance powerhouse Aviva has intensified its pursuit of Direct Line, raising its takeover offer to £3.4 billion in a strategic move that could reshape the UK insurance landscape. The enhanced proposal of 261 pence per share represents a significant increase from the initial 250 pence offer that valued the company at £3.3 billion.
Direct Line’s board, under the leadership of chair Danuta Gray, previously dismissed Aviva’s first approach, labelling it as “highly opportunistic” and substantially undervaluing the enterprise. The original non-binding offer comprised 112.5 pence in cash alongside 0.282 new Aviva shares.
The proposed merger would establish a dominant force in British insurance, controlling more than 20% of the motor market and 15% of the home sector. Such market concentration could trigger scrutiny from competition regulators and the Bank of England’s insurance supervisors.
This latest bid marks the fourth recent attempt to acquire Direct Line, following two rejected offers from Belgian insurer Ageas earlier this year. The revised proposal from Aviva represents an 11% premium on Direct Line’s Thursday closing price of 236 pence.
Direct Line’s current chief executive, Adam Winslow, a former Aviva executive, is steering a transformation programme focused on motor, home, commercial business, and car breakdown coverage. The company maintains its commitment to achieving £100 million in cost savings by late 2025.
Market analysts suggest there might be room for further price improvements. Berenberg analysts indicate Aviva possesses “ample capacity” to enhance its offer, potentially reaching 275 pence per share. The situation remains fluid as major shareholders, including Schroders, Redwheel, and M&G, maintain positions in both companies.
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