Aviva makes £3.3bn bid to buy Direct Line

Aviva has sent shockwaves through Britain’s insurance industry with a £3.3 billion bid to buy Direct Line, its troubled rival.
The cash-and-shares proposal valued the motor and home insurer at 250p a share, the FTSE 100 company said on Wednesday evening.
That offer was rejected by Direct Line on Tuesday but Aviva signalled in a statement to the stock exchange after the market closed on Wednesday that it was still interested in a deal, arguing that a takeover “would deliver attractive returns” for both sets of shareholders.
Direct Line told its investors in a separate statement that Aviva’s bid was “highly opportunistic and substantially undervalued the company”.
It is the second time this year that Direct Line has attracted a suitor after Ageas, a Belgian insurer, tried and failed to acquire the Bromley-based business for £3.2 billion. Fighting off the Ageas approach was a baptism of fire for Adam Winslow, who took charge of Direct Line at the beginning of March and has been tasked with turning around the struggling company.
Winslow, 45, was poached from Aviva, where he ran the company’s general insurance business in the UK and Ireland. Dame Amanda Blanc, the Aviva chief executive and his former boss, is now trying to acquire Direct Line before he can revive its fortunes.
Direct Line has been left vulnerable to takeover approaches after a series of profit warnings in 2022 and 2023, when the company was caught out by claims inflation in the motor insurance market. The cost of handling claims rose sharply after prices for second-hand cars and spare parts increased rapidly, wrongfooting Direct Line.
The situation came to a head in January last year, when the company rattled investors by shelving its dividend. Penny James, who was its chief executive, left weeks later.
Her successor has set out a strategy to revamp Direct Line through a cost reduction drive, which includes a plan to cut about 550 jobs, or about 5 per cent of the FTSE 250 company’s workforce. He has also reinstated its dividend.
Even so, despite his planned overhaul, the insurer’s shares are down almost 13 per cent this year and closed last night at 158¾p, off ¼p on the day, valuing it at £2.1 billion.
Blanc, 57, has also driven a turnaround of Aviva since taking charge of the company in 2020. She immediately pursued a string of deals to sell off non-core businesses overseas, including in Italy, France, Poland, Turkey, Vietnam and Singapore.
These disposals not only streamlined Aviva to focus the group on the UK, the Republic of Ireland and Canada, but allowed it to hand back more than £5 billion to shareholders, addressing investor frustration over the insurer’s lacklustre stock market returns.
However, while Blanc has won plaudits in the City for reshaping Aviva, the next leg of her strategy has looked unclear.
Aviva, which is valued at £13.1 billion, said last night that buying Direct Line “would be consistent with its strategy to accelerate growth in its UK businesses and further pivot the group towards capital-light business lines”. Its rejected offer was made up of 112½p in cash plus 0.282 new Aviva shares for each share in Direct Line.
Under City rules, Aviva has until Christmas Day to make a firm offer or walk away from Direct Line. Aviva was forced to issue a statement detailing its bid after Bloomberg reported it had made an approach.