Direct Line has rejected a raised takeover offer made by Belgian insurer Ageas valuing it at around £3.11bn earlier this month, calling it “uncertain, unattractive” and “highly opportunistic”.
In a statement to the market, the British firm said it received a higher offer from Ageas on 9 March, implying a three per cent raised valuation at 237p per share.
The deal would have netted shareholders 120p per share in cash and one newly issued Ageas share for every 28.4 Direct Line shares they own.
The Belgian company previously made an offer in January that valued the company at around £3.1bn. The 233p per share offer was a premium of 43 per cent. Analysts at Jefferies said Ageas would have to make an offer of between 270p and 300p to be in with a greater chance of success.
Direct Line’s board again voted unanimously to reject Ageas’ second offer. Direct Line’s shares fell six per cent following the news.
“The board considered the latest proposal with its advisers and continues to believe the latest proposal is uncertain, unattractive, and that it significantly undervalues Direct Line Group and its future prospects while also being highly opportunistic in nature,” the company said in a statement.
It added that it was confident in the group’s “standalone prospects”. Direct Line is due to report its full-year results on 21 March and update investors on its turnaround plan.
The FTSE 250 company’s cost base, thought to be higher than many of its immediate rivals, is said to be a priority for new chief Adam Winslow, who only joined the firm from Aviva last week.
Direct Line swung to a pretax loss of £45m in 2022 from a £446m profit in 2021, which it pinned on market volatility, higher inflation and weather-related claims.
The firm agreed last July to repay £30m in compensation to existing customers who were charged more than new ones for car and home insurance.
Ageas has until 27 March to announce a firm intention on whether to make another offer. After the first rejection, it beefed up its advisory team by hiring Deutsche Bank.
Hans De Cuyper, CEO of Ageas, said on Wednesday: “We have made a compelling possible offer that represents a substantial premium to Direct Line’s undisturbed share price.
“Our improved possible offer delivers substantial cash proceeds to Direct Line shareholders, whilst ensuring they benefit from the material value creation that we believe the combination of the UK businesses of Ageas and Direct Line will deliver.
“We look forward to engaging with the Direct Line board of directors on the terms of our improved possible offer.”