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Aviva, the UK insurance heavyweight, has agreed a preliminary takeover deal with Direct Line, after winning over its smaller rival with a sweetened bid.
The deal, announced in a joint statement by the companies on Friday, will see Aviva pay 129.7p in cash, and 0.2867 of its own shares for each Direct Line share. Direct Line shareholders would also receive a 5p per share dividend before completion.
The agreement values Direct Line’s equity at £3.6bn.
The price is around a 10 per cent increase on the FTSE 100 group’s initial 250p approach, which consisted of cash and shares. The Direct Line board dismissed that bid as “highly opportunistic”.
The deal will create a powerhouse in UK motor insurance, where the combined group is estimated to have more than a fifth of the market.
Aviva has until December 25 to make a firm offer.
This is a developing story
