The UK insurance coverage agency Aviva has improved on an earlier deal rejected by its smaller competitor Direct Line.
Direct Line has agreed a takeover provide from Aviva that can pave the way in which for the mixed group to personal a fifth of the UK motor insurance coverage market.
The bid, which values Direct Line at £3.6bn, entails Aviva paying 275p per share.
This comes after Direct Line rejected Aviva’s decrease provide of 250p final week, stating that it “considerably undervalued the corporate”.
On the phrases of the brand new provide, Aviva would pay 129.7p in money, and 0.2867 new Aviva shares can be issued for every Direct Line share.
A dividend of as much as 5p would even be given to Direct Line shareholders forward of the deal’s completion, it revealed.
“The Board of Direct Line stays assured in Direct Line’s prospects as a standalone firm and continues to have conviction within the capabilities of the newly established management group to ship the introduced technique,” mentioned Aviva and Direct Line in a joint assertion on Friday.
Shareholders urged to simply accept
They nonetheless added that, after cautious consolidation, the Direct Line board would advise shareholders to simply accept the takeover bid.
Direct Line shareholders would personal roughly 12.5% of the issued and to be issued share capital of Aviva.
“Along with the enticing headline worth per share, the mix would offer the chance to ship important synergies, creating substantial extra worth for each units of shareholders,” mentioned the joint press assertion.
Aviva has till 5pm on 25 December to both make a agency provide for Direct Line – as the present one remains to be preliminary – or to stroll away.
It’s believed that the deal will draw scrutiny from the UK’s competitors regulator because the mixed group will personal such a big share of the UK insurance coverage motor market.
Earlier this 12 months, Direct Line rejected two takeover bids from the Belgian insurer Ageas.
The second provide valued the agency at £3.2bn, which Direct Line branded as an “unattractive” provide for shareholders.
Aviva’s share worth was down round 0.5% in Friday day by day buying and selling at about 10h45 CET.
Direct Line shares had been up round 7% in day by day buying and selling on the identical time.