topnaijanews Stay informed with the latest Nigerian news at your fingertips
The UK insurance firm Aviva has improved on an earlier deal rejected by its smaller competitor Direct Line.
ADVERTISEMENTDirect Line has agreed a takeover offer from Aviva that will pave the way for the combined group to own a fifth of the UK motor insurance market.
The bid, which values Direct Line at £3.6bn, entails Aviva paying 275p per share.
This comes after Direct Line rejected Aviva’s lower offer of 250p last week, stating that it “substantially undervalued the company”.
On the terms of the new offer, Aviva would pay 129.7p in cash, and 0.2867 new Aviva shares would be issued for each Direct Line share.
A dividend of up to 5p would also be given to Direct Line shareholders ahead of the deal’s completion, it revealed.
“The Board of Direct Line remains confident in Direct Line’s prospects as a standalone company and continues to have conviction in the capabilities of the newly established leadership team to deliver the announced strategy,” said Aviva and Direct Line in a joint statement on Friday.
Shareholders urged to accept
They nonetheless added that, after careful consolidation, the Direct Line board would advise shareholders to accept the takeover bid.
Direct Line shareholders would own approximately 12.5% of the issued and to be issued share capital of Aviva.
“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,” said the joint press statement.
Aviva has until 5pm on 25 December to either make a firm offer for Direct Line – as the current one is still preliminary – or to walk away.
It is believed that the deal will draw scrutiny from the UK’s competition regulator as the combined group will own such a large share of the UK insurance motor market.
Earlier this year, Direct Line rejected two takeover bids from the Belgian insurer Ageas.
The second offer valued the firm at £3.2bn, which Direct Line branded as an “unattractive” offer for shareholders.
Aviva’s share price was down around 0.5% in Friday daily trading at about 10h45 CET.
Direct Line shares were up around 7% in daily trading at the same time.
