LONDON - Aviva (LON:AV) PLC, a leading UK-based insurance group, has reached an agreement to acquire Direct Line (LON:DLGD) Insurance Group plc in a transaction valued at approximately £3.7 billion. The deal, which will be executed through a Scheme of Arrangement under Part 26 of the Companies Act 2006, was announced today, with both companies' boards recommending the offer.
Under the terms of the acquisition, Direct Line shareholders will receive 0.2867 new Aviva shares, 129.7 pence in cash, and up to 5 pence in dividend payments per Direct Line share held. This offer values each Direct Line share at 275 pence, representing a premium of 73.3% over the closing price on November 27, 2024, and a 49.7% premium over the six-month volume-weighted average price.
Aviva's strategic priorities since 2020 have focused on simplifying operations and growing capital-light businesses. The acquisition of Direct Line is expected to create a leading UK Personal Lines franchise and is projected to accelerate Aviva's strategy, leading to an anticipated 10% earnings per share accretion once pre-tax cost synergies of £125 million are fully realized.
Dame Amanda Blanc, Group Chief Executive Officer of Aviva, stated that the acquisition is excellent news for customers and shareholders of both companies, promising competitive pricing, enhanced claims experience, and better service due to the combined group's financial strength and scale.
Danuta Gray, Chair of Direct Line, remarked that the offer delivers significant value for Direct Line shareholders and reflects the quality of the business and its focus on customers.
Adam Winslow, Chief Executive Officer of Direct Line, highlighted the progress made on Direct Line's turnaround strategy and expressed confidence that the combined entity will be well-placed to deliver for its customers in a competitive UK general insurance marketplace.
The acquisition will not affect Aviva's Solvency II shareholder cover ratio, which is expected to remain at the upper end of the group's working range. Aviva also intends to declare a mid-single-digit percentage uplift in the dividend per share following the completion of the deal.
The transaction is subject to the approval of Direct Line shareholders and customary regulatory approvals, with the Scheme Document expected to be published in early 2025 and the deal anticipated to become effective in mid-2025.
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