Aviva (LON: AV.) and Direct Line Insurance Group (LON: DLG) announced Friday that they have reached a preliminary agreement on the financial terms of a potential merger.
The proposed deal would see Aviva acquire all of Direct Line's shares.
Under the terms of the deal, Direct Line shareholders will receive a combination of cash, new Aviva shares, and dividends. The total value of the offer is estimated at 275 pence per Direct Line share, representing a premium of 73.3% to the closing share price on 27 November 2024.
While Direct Line's board remains confident in the company's standalone prospects, it has acknowledged the significant premium offered by Aviva and is open to recommending the deal to shareholders, subject to the final terms and conditions.
Direct Line rejected an initial offer from Aviva, labelling it “highly opportunistic” and saying it “substantially undervalued the company”. However, the latest offer has hit the mark for the company.
Aviva has until 25 December 2024 to announce a firm intention to make an offer or to confirm that it will not proceed with the deal.
Both companies believe that the merger would create significant synergies and enhance value for shareholders. The combined entity would be a leading insurance group in the UK.
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