Blanc scores a Direct hit: Aviva boss’s swoop on rival mustn’t come as an enormous shock, says ALEX BRUMMER

The turnaround at Aviva under the stewardship of chief executive Amanda Blanc has been extraordinary.

Superfluous overseas businesses have been sold, cash returned to shareholders and Blanc has built up a war chest for investment.

The decision to bid for Direct Line, the company which revolutionised the way car insurance is sold, should not come as a huge surprise.

Founded by insurance entrepreneur Peter Wood, Direct Line has fallen into disrepair in recent times and left in the dust by other general insurance innovators, notably Cardiff-based Admiral.

Aviva’s offer price of 250p-a-share, a premium of 57.5 per cent to the closing price of the shares, places a value of £3.3billion on Direct Line and was intended to be a knock-out bid which encouraged chairman Danuta Gray and chief executive Adam Winslow, an Aviva emigre, into talks. 

But as of last night there was no communication. By going public, Blanc has effectively gone hostile.

Shareholders in Aviva will be reassured that the new ambition shown by Britain’s strongest insurance brand will not affect promises made to return capital to investors.

In terms of scale, Aviva, with a market value of £13.1billion, is a goliath to Direct Line’s dwarf. Nevertheless, in the insurance world the deal is significant with Direct Line speaking for just under 9m policies.

Not all insurance deals go well. The agreed merger of Royal Insurance and Sun Alliance way back in the 1990s was a flop which left an indelible mark on the sector. 

The current proposed deal is effectively a rescue for a company going through hard times. But even generous premiums to market value have been rejected by shareholders in UK-listed firms this year.

 Blanc and her team are not home and dry just yet.

Royal plunder

The record of key UK industries falling into overseas hands is not a happy one. There is barely a day when Thames Water is not in the headlines, a consequence of labyrinthine finances, leaking pipes and seeping sewage. Bits of the UK car industry, such as BMW-owned Mini, do work.

But foreign ownership of Vauxhall and Ford, both of which are winding down in Britain, means that decisions on jobs in the EV era are made in the Netherlands (nominal HQ of Stellantis) and Detroit.

In spite of this unhappy experience, Business Secretary Jonathan Reynolds shows no inclination to intervene in the £3.6billion bid by the Czech billionaire Daniel Kretinsky for Royal Mail-owner International Distribution Services. 

It is to be hoped that Reynolds and his Business Department has taken a deep dive into Kretinsky’s past Eastern European business connections and those of his partners in the bidding EP Group.

Reynolds may feel no sentimentality about selling Britain’s oldest corporation. However, the multilayer, high-cost financing by a consortium of foreign banks is, like that of Thames Water, an invitation to financial plunder at the expense of consumers. 

We know from other overseas takeovers that pledges about jobs, investment and modernisation may look watertight but are unenforceable because business conditions change so rapidly. 

Labour may feel it has joined the good guys by allowing the deal for Royal Mail to progress in the name of foreign investment. It is in danger of contributing to a financing doom loop.

Crosbie coup

Debbie Crosbie’s swoop on Virgin Money has turned out to be shrewd. A disappointing half-year for Nationwide, Britain’s largest mutual finance group, is masked by a £2.3billion payday following the purchase of the bank.

Nationwide’s coup illustrates how foolish it is for the boards of FTSE 350 companies to sell themselves for what looks like a generous premium when the underlying value is so much greater.

As matters stand, it looks certain that even though Nationwide’s profits plunged 43 per cent to £568million in the first half, members can expect a ‘fairer share’ payment following the Virgin Money windfall.

Virgin shareholders and customers have reason to feel aggrieved. The Virgin board sold them short and borrowers and depositors will see Nationwide customers benefit while they receive nothing.

It ill behoves Nationwide, that sings so loudly from the mutual song sheet, that Virgin Money customers are being treated like second class citizens. Disappointing.