Direct Line rejects improved £3.2bn bid from Belgian rival Ageas
- Bid was 3% up on prior provide, however Direct Line mentioned it nonetheless undervalued the agency
- Chief exec anticipated to make case for remaining unbiased in annual outcomes
Direct Line has rejected an improved takeover bid from Belgian rival Ageas, which the insurer mentioned nonetheless ‘considerably undervalued’ the group.
Ageas’ newest provide of 120p in money per share, plus one newly issued Ageas share for roughly each 28.4 Direct Line shares, valued the corporate at £3.17billion.
This was up by round 3 per cent from a earlier bid of £3.1billion.
But Direct Line advised traders on Wednesday the bid, which has an implied a price of 239p per share, is ‘unsure [and] unattractive,’ and undervalues the group and its future prospects, ‘whereas additionally being extremely opportunistic in nature’.
Direct Line shares have been down 5.2 per cent to 214p in early afternoon buying and selling.
Rejected: Direct Line dismisses second, improved takeover bid
The shares have added round 30 per cent during the last 12 months due to a lift on the finish of February when Ageas made its first provide. They are down greater than 40 per cent during the last 5 years.
The FTSE 250 insurer, which has 10 million prospects and hosts manufacturers Churchill and Green Flag, added it was ‘assured’ about its standalone prospects and suggested traders to take no motion with regard to the Ageas bid.
Hans De Cuyper, CEO of Ageas, described the Belgian agency’s newest provide as ‘compelling’ and delivering ‘substantial money proceeds to Direct Line shareholders’, who would ‘profit from the fabric worth creation’ provided by combining the corporations.
But Direct Line boss Adam Winslow, who final 12 months changed Penny James, is anticipated to put out the case for the insurer to stay unbiased and listed in London alongside the corporate’s annual outcomes on 21 March.
Winslow’s plan is anticipated to stipulate methods Direct Line might develop into extra tech-savvy, which might embrace establishing an app for the primary time. He can be more likely to suggest value cuts, based on the The Mail on Sunday.
It follows a dismal few years for Direct Line shareholders, who’ve suffered a number of revenue warnings.
Founder Sir Peter Wood advised The Mail on Sunday earlier in March that the enterprise had been run ‘so abysmally’ for years that Direct Line deserved to be taken over.
The FTSE 250-listed agency was launched in 1985 because the UK’s first telephone-only insurer.
In January of final 12 months Direct Line scrapped its dividend after admitting it had been caught out by a surge in claims for burst pipes attributable to icy climate.
It was later pressured to repay about £30million to prospects who have been charged greater than they need to have been to resume house and automotive insurance coverage insurance policies.
Direct Line posted a lack of £76 million in September. It offered a business insurance coverage unit for £520million in an effort to shore up its stability sheet.
Analysts at UBS mentioned final week {that a} takeover by Ageas ‘makes strategic sense’ as it will give the Belgian agency ‘the potential to strengthen its place in an present European market and rebalance its profile in the direction of non-life insurance coverage’.
They added: ‘The underlying attractiveness of UK private strains insurance coverage is enhancing, with the motor insurance coverage cycle hardening, [and there are] higher value synergies generated from a possible in-market deal than an acquisition in a brand new geography.
‘We estimate [roughly] €120million value saves [per annum] post-tax and assume an implementation value of 1.5x of those potential value synergies at [around] €180million.
‘We assume [approximately] €175million of diversified capital synergies from elevated diversification profit and mannequin optimisation.’
