Direct Line shares surged 25% on Wednesday following Belgian insurer Ageas’ offer to fully-acquire the British insurance company for approximately £3.1 billion ($3.9 billion).
In a statement on Wednesday, Ageas confirmed it had offered to buy Direct Line at a 42.8% premium on its current share price, with a view to combining the company into its U.K. business.
In a statement published on Wednesday, Direct Line said it was first approached by Ageas on 19 January, but said its board had decided to reject the Belgian firm’s offer after considering it “to be uncertain, unattractive… [and] highly opportunistic in nature.”
The statements followed reports in Bloomberg early Wednesday that the Belgian insurer was planning to make an offer that saw Direct Line’s share price surge.
The surge in Direct Line
DLG,
shares Wednesday followed a 12% fall year-to-date and a 53% loss of their value over the past five years. Ageas
AGS,
shares fell 2% having dropped 3% in 2024 so far.
Ageas’ offer comes in the wake of a tough few years for Direct Line after its profits collapsed in 2022 due to inflation in the cost of motor parts and a surge in weather-related claims that saw the company scrap its dividend.
In August 2023, Direct Line appointed Aviva
AV,
executive Adam Winslow as its new CEO following Penny James exit from the company in the wake of the 2022 results.
The following month, Direct Line, which started in 1985 as the first U.K. company to sell car insurance policy directly to customers, sold its brokered commercial insurance business to Canada’s Intact Financial for £520 million.
Winslow, who was previously CEO of Aviva’s U.K. & Ireland division, is now set to start his new job at the top of Direct Line on Friday 1 March, with a mandate to return the insurer to profitability.
Direct Line said in a statement that its board “is confident in Direct Line Group’s standalone prospects given its strong strategic position, powerful brands, and robust capital position.”
Ageas said acquiring Direct Line would strengthen its position in the U.K. and re-balance its business towards non-life insurance due to the British firm’s speciality in car insurance policies.
The Brussels headquartered firm added that the fundamentals of the U.K.’s insurance market were now starting to improve, as the company said repricing initiatives were helping the sector keep up with inflation.
Analysts at Citi noted that previous insurance sector buyouts have seen Hastings snapped up at a 47% premium and Esure bought out at a 28% premium.
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