27 November 2024
Aviva plc
Possible Offer for Direct Line Insurance Group plc
In response to press speculation, Aviva announces that on 19 November 2024, it submitted a non-binding proposal to the Board of Direct Line Insurance Group plc (“Direct Line”) regarding a possible offer to acquire 100% of Direct Line (the “Proposal”).
Given Aviva’s desire to reach a swift conclusion and to minimise distraction for both companies, Aviva presented a highly attractive Proposal with high execution certainty, which also met Aviva’s strict financial criteria for acquisitions. Aviva communicated to Direct Line that it believed this Proposal represented a highly compelling offer and that it was designed to encourage prompt engagement to commence the work needed to reach an offer announcement under Rule 2.7 of the Code as soon as possible.
Under the terms of this Proposal, Direct Line shareholders would be entitled to receive:
- 112.5 pence per Direct Line share in cash, funded through Aviva’s internally available cash resources; and
- 0.282 new Aviva shares per Direct Line share.
Based on Aviva’s share price on the day before the Proposal was submitted, being 487.6 pence per Aviva share, the Proposal represents total consideration valued at 250 pence per share. This represents a premium of:
- 59.7% to the closing Direct Line share price on 18 November 2024 (the day before the Proposal was submitted);
- 57.5% to the closing Direct Line share price on 27 November 2024 (being the last practicable date prior to this announcement); and
- 55.9% to the one month volume-weighted average Direct Line share price to 27 November 2024.
In addition, the Aviva share consideration would allow Direct Line shareholders to participate in the upside in Aviva shares as well as the benefits of the combination.
On 26 November 2024, the Board of Direct Line rejected the Proposal as substantially undervaluing Direct Line, and has declined to engage further with Aviva.
Aviva believes that an acquisition of 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. The acquisition would expand Aviva’s presence in the attractive UK Personal Lines market, building on its existing strength, and creating a more efficient platform from which to serve existing and new customers. In addition, the acquisition would allow Direct Line customers to benefit from Aviva’s breadth, scale and financial strength.
Aviva’s leading Personal Lines management team continues to deliver profitable organic growth, particularly within the Retail segment, including via its innovative Aviva Zero proposition. In its Q3 2024 trading update, Aviva announced that it had delivered year-to-date UK Personal Lines premium growth of 26%, driven by 43% growth in Retail and supported by 13% growth in Motor policy count. Aviva believes that the complementary fit of the two groups would support continued operating momentum whilst keeping the customer at the centre of everything it does.
Aviva believes that an acquisition of Direct Line would deliver attractive returns for both Aviva and Direct Line shareholders, including unlocking value that is inaccessible to Direct Line standalone. Aviva believes that the acquisition would deliver material cost and capital synergies, incremental to Direct Line’s existing cost savings programme.
An acquisition of Direct Line would be consistent with Aviva’s capital management framework and its strict strategic and financial criteria for executing M&A. Aviva remains committed to delivering growing dividends and sustainable capital returns to its shareholders.