Aviva set for Direct Line takeover after sweetened 275p-per-share bid

Aviva is on course to secure a takeover of smaller competitor Direct Line following the latter's concession to a superior bid tabled by the FTSE 100 insurance giant.

In an announcement to the market this morning, the companies confirmed that they have agreed on terms for Aviva to acquire Direct Line at 275p per share, as reported by City AM.

This offer represents a considerable 73% premium over Direct Line’s share price prior to disclosure of Aviva's initial acquisition interest last month.

Although Direct Line initially rejected Aviva's preliminary proposals and maintained its confidence as an independent entity, it concedes that the enhanced bid is compelling. "The Board of Direct Line has carefully considered the Proposal with its advisers and consulted with Direct Line shareholders during the offer period, and has concluded that the Proposal is at a value that it would be minded to recommend to Direct Line shareholders," the company imparted.

While details are still being finalised, under proposed terms, Direct Line’s investors would retain a stake of about 12.5% in the combined entity. "The Direct Line Board believes that, in addition to the attractive headline value per share, the combination would provide the opportunity to deliver significant synergies, creating substantial additional value for both sets of shareholders," both firms expressed jointly.

A possible merger could be in the works, potentially forming a major player in London's insurance market. This comes in the wake of a challenging couple of years for the smaller entity, which has issued several profit warnings.

The resulting conglomerate is anticipated to rank amongst the UK's premier insurers, signalling an end to the recent troubles faced by Direct Line. Amidst efforts to rejuvenate its operations, Direct Line has unveiled cost-saving measures expected to accrue approximately £50 million in 2025.

In their latest quarterly update issued this month, the company hinted at the potential elimination of about 550 jobs as a part of its economising strategy. Earlier in the year, the firm had spurned two overtures from Belgian insurer Ageas, with one proposal valuing the company at £3.1 billion.