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UK insurance company Direct Line has rejected a takeover approach from rival Aviva, saying the cash and shares offer was “highly opportunistic” and “substantially” undervalued the business.
Aviva said on Wednesday it had submitted a proposal offering 112.5 pence in cash and 0.282 new Aviva shares for every Direct Line share.
The proposal represented total consideration of 250p for each Direct Line share, and values the company’s equity at about £3.3bn. Direct Line’s shares closed at 158.7p on Wednesday, ahead of Aviva’s announcement.
Direct Line’s board said the unsolicited and conditional proposal by Aviva did “not reflect the standalone value that can be delivered by the company”.
The board added it unanimously rejected the proposal on Tuesday, and said it “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,” it said.
Direct Line chief executive Adam Winslow, who took the position this year, was previously a senior executive at Aviva.
Aviva said it believed that the acquisition of Direct Line would help “accelerate growth” in its UK business, adding the proposed deal would “allow Direct Line customers to benefit from Aviva’s breadth, scale and financial strength”.
