Aviva has struck a definitive settlement to buy Direct Line for £3.7 billion, creating one of many largest motor insurance coverage suppliers in Britain. The FTSE 100 insurer pays 275p per share for the FTSE 250-listed firm, representing a 73.3 per cent premium to Direct Line’s share value earlier than talks emerged in November.
The acquisition, set for completion by mid-next 12 months, may also create a number one dwelling insurance coverage enterprise and is forecast to herald round £125 million in value financial savings. Nonetheless, the ensuing consolidation is predicted to place roughly 2,000 jobs in danger. Aviva says it goals to handle a few of these redundancies by way of current vacancies and redeployment alternatives throughout the mixed group.
Danuta Grey, chair of Direct Line, mentioned the supply delivered “significant value” for shareholders, noting the corporate’s established manufacturers, sturdy buyer focus and expert workforce. As soon as merged, Aviva will stand toe-to-toe with Admiral within the fiercely aggressive motor insurance coverage market, whereas additionally solidifying its place because the UK’s greatest dwelling insurer.
Dame Amanda Blanc, Aviva’s chief govt, mentioned the deal accelerates her technique of constructing extra capital-light strains of enterprise. She emphasised the sturdy alignment in how each firms serve prospects, including that the enlarged group will supply “competitive pricing, an enhanced claims experience and even better service.”
Having bought eight worldwide operations since 2020, Aviva has been refocusing its portfolio on the UK, Eire and Canada. Its shock strategy for Direct Line final month additionally included bids for Churchill and Inexperienced Flag, each of that are a part of Direct Line’s suite of manufacturers.
The takeover follows a difficult interval for Direct Line, which was hit by a sequence of revenue warnings in 2022 and 2023 amid rising motor insurance coverage claims. An earlier £3.2 billion supply from Belgian insurer Ageas fell by way of final 12 months, simply months after Direct Line appointed Adam Winslow, previously of Aviva, as its chief govt.
Aviva expects the mixed entity to spice up earnings per share by about 10 per cent as soon as it achieves the focused value financial savings. It plans to carry its dividend by a mid-single digit proportion after the deal closes; at current, Aviva yields 7.4 per cent, among the many highest within the FTSE 100.
Beneath the phrases of the deal, Direct Line shareholders will obtain a mixture of money and shares: 0.2867 new Aviva shares, 129.7p in money, and as much as 5p in dividends. Aviva will personal roughly 87.5 per cent of the newly merged firm upon completion.
Shares in Aviva closed up 1.1 per cent at 462½p, whereas Direct Line gained 3.8 per cent to 252½p.
