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Direct Line Insurance Group PLC on Friday said it was minded to accept an improved £3.6 billion cash-and-shares offer from FTSE 100-listed insurer Aviva Group PLC. The proposed deal, announced in a joint statement, will see Aviva pay 129.7p in cash, and 0.2867 of a new Aviva share for each Direct Line share. Direct Line shareholders also would receive a 5p per share dividend before completion. Based on Aviva’s closing share price before the offer period started in November, the proposal values each Direct Line share at 275p. The new plan represents a 10% premium to Aviva’s initial approach of 250p per share made in November. Under the initial proposal Direct Line shareholders would have been entitled to receive 112.5p per share in cash and 0.282 of a new Aviva share for each Direct Line share. But Bromley-based Direct Line had dismissed this as ‘highly opportunistic’ and said it ‘substantially undervalued the company’. On Friday, Direct Line said it was minded to recommend the new terms to shareholders, despite remaining confident in its prospects as a standalone company. ‘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,’ it said. Direct Line shareholders would own around 12.5% of the enlarged company. For its part, Aviva said it believes in the ‘strong strategic and financial logic’ for a combination. Aviva now has until the close of business on Christmas Day to announce a firm intention to make an offer buy Direct Line, or to walk away. Shares in FTSE 250-listed Direct Line were up 7.1% to 252.66p in London early Friday, giving it a market value of £3.31 billion. Aviva was 0.6% lower at 486.30p. It has a market capitalisation of £13.02 billion. Copyright 2024 Alliance News Ltd. All Rights Reserved.
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