Investing.com — Aviva (LON:) said on Monday that it has reached a definitive agreement to buy Direct Line Insurance Group (LON:) in a cash-and-share transaction valued at about £3.7 billion.
Under the terms of the deal, Direct Line shareholders will receive 0.2867 newly issued Aviva shares, 129.7 pence in cash per share, and up to 5 pence in potential dividend payments, subject to approval.
Based on Aviva’s closing share price on November 27, this values Direct Line shares at 275 pence each.
The valuation represents a premium of 73.3% over Direct Line’s closing price before the offer was announced and nearly 50% above its six-month average.
Aviva will assume control of the combined entity, with its shareholders holding 87.5% of the merged group, while Direct Line shareholders will retain 12.5%.
The deal is expected to conclude by mid-2025, contingent on regulatory and shareholder approvals, as well as a court-sanctioned scheme of arrangement.
This deal aligns with Aviva’s emphasis on streamlining its operations and expanding in the UK’s personal insurance sector, which generates over £26 billion annually in gross written premiums.
Aviva anticipates annual cost synergies of £125 million by the third year post-acquisition, alongside enhanced customer offerings and significant growth potential.
Direct Line has recently embarked on a turnaround strategy to rebuild its financial health, but its valuation has lagged amid market challenges.
The offer allows Direct Line’s shareholders to capitalize on immediate value while benefiting from the potential growth of the combined group.
Aviva stated that the deal underscores its commitment to delivering value to customers and shareholders by leveraging scale and technological advancements.
“In a highly competitive UK general insurance marketplace, the combined entity will be very well placed to deliver for its customers,” said Adam Winslow, chief executive at Direct Line.
Shares of Direct Line were up 3.1% at 03:35 ET.
