Direct Line has rejected a £3.3bn takeover offer from UK rival Aviva calling the move “highly opportunistic” and one which “substantially undervalued” the insurer.
Aviva, the UK’s largest insurer which also holds an equity release business, offered 250p a share, made up of cash and Aviva shares, for Direct Line stock last night after markets had closed.
Direct Line said: “The board has considerable conviction in the capabilities of our newly established leadership team and stands firmly behind their delivery of our strategy.
“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.”
Direct Line said earlier this month it plans to cut 550 jobs as part of a turnaround plan to save £50m next year. The firm has lost nearly 400,000 car insurance customers over the past year.
It hired Adam Winslow as chief executive in March who joined from Aviva, where he ran the general insurance business in the UK and Ireland.
A market statement from Aviva, led by group chief executive Amanda Blanc (pictured), last night said: “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.”
Earlier this month, Aviva said its retirement unit’s sales, which holds its later life business, jumped 67% to £7.3bn from a year ago, driven by higher bulk purchase annuity volumes.
It pointed out that individual annuity sales were up 13% to £957m “a result of sustained customer demand in the higher interest rate environment”.
But added that equity release sales “were lower reflecting a contraction of the market,” without providing further details in a third-quarter trading statement to the end of September.
In February and March, Direct Line rejected two takeover approaches from Belgian insurer Ageas, the second valuing the business at £3.2bn.
