This weekend, the boss of the Belgian insurance company that made the audacious bid for Direct Line to the tune of £3 billion will be flying to China to meet with his largest shareholder amid rumors that he’s racing to gain support for a higher offer for the FTSE 250.
Hans De Cuyper will meet with senior officials of Fosun – the Chinese conglomerate which owns Wolverhampton Wanderers Football Club. Fosun owns 10% of Ageas, and its support will be vital if the cash-and shares bid can be increased to a price that is high enough to satisfy the Direct Line board. The Direct Line board has rejected two previous offers.
The trip coincides with a crucial week for Direct Line and its new CEO Adam Winslow who arrived just a few days ago, after the news broke of Ageas’ first approach. Winslow will use the full-year results on Thursday to outline ways to reduce costs and increase Direct Line’s profitability in the long term. Churchill, Green Flag and other household names are owned by the company.
Hans De Cuyper is the chief executive officer of Ageas and he meets senior officials from Fosun.
The City will wait to see if Winslow is able to resume dividends, or start a buyback of shares. Direct Line insists it is “confident” of its independent prospects. It rejected Ageas’ second cash-and shares offer last week that was 3% higher than its previous offer and valued Direct Line as 237p per share.
The shares, which closed at 214p on Friday, showed that City officials are sceptical about the success of the bid. Sky News reported that one Ageas shareholder wanted to abandon the bid. Bloomberg reported separately that Fosun considered selling its Ageas share to French bank BNPParibas. Direct Line and Ageas declined comment.
Direct Line shares, which were hammered by a profit warning last year, leading to the resignation of the then-chief executive Penny James have increased by approximately 33 percent since the bid. The fear is that if the bid fails, the shares could drop again.
Adam Winslow is the new boss at Direct Line. He is in for a baptism by fire, and the stock price is on the rise.
Thomas Bateman is an analyst with Berenberg Bank. He said: “This stock was a long-term performer and therefore, the pressure will be put on Adam Winslow, to convince investors that he can turn things around.”