Aviva Agrees to Buy UK Insurer Direct Line for £3.7 billion

In a significant development in the UK insurance sector, Aviva Plc has reached an agreement to purchase Direct Line Insurance Group Plc for approximately £3.7 billion ($4.65 billion). This deal, if finalized, is set to crown them as the nation’s largest motor insurer.

According to a statement on Monday, each Direct Line shareholder stands to receive 0.2867 new Aviva shares, 129.7 pence in cash, and potentially up to 5 pence in dividend. The transaction values each Direct Line share at 275 pence, a hefty premium of around 73% compared to the closing price on Nov. 27, when takeover rumors first surfaced. The Direct Line board deems the terms “fair and reasonable” and plans to unanimously recommend shareholder approval. Post-completion, expected around mid-2025 pending approvals, Aviva shareholders will hold roughly 87.5% of the combined entity.

Direct Line’s chair, Danuta Gray, said the deal “delivers significant value” and showcases the firm’s allure. CEO Adam Winslow, who once led Aviva’s UK and Ireland general insurance arm, added that it’ll help the company thrive as part of the Aviva group. In trading, Direct Line shares surged up to 3.6% on Monday, with gains since Nov. 27 hitting about 58%. Meanwhile, Aviva shares dipped around 6.2%. As the deal progresses, focus will shift to the UK’s antitrust review, but analysts predict a smooth path due to market fragmentation.

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