Direct Line shares surge amid takeover speculation
Shares in Direct Line have rocketed by more than 20% after a Belgian rival confirmed it was considering a £3.1bn offer to buy the British motor insurer.
The Brussels-headquartered insurer Ageas said in a statement on Wednesday that it was in the “preliminary stages” of a possible offer to acquire the Kent-based motor insurer.
The news pushed the share price above 205p a share at one point on Wednesday, more than 25% higher than the 163p it closed at on Tuesday.
Bloomberg reported earlier on Wednesday that Ageas had made an approach for Direct Line in recent weeks but that this had been rejected.
The statement from Ageas issued later in the day outlined a cash and share offer which would pay 233p a Direct Line share, 43% more than Tuesday’s closing price. The deal would also involve Direct Line shareholders receiving 100p a share in cash and one newly issued Ageas share for every 25 Direct Line shares they own.
A Direct Line spokesperson said it did not comment on market rumours or speculation.
The offer comes after a tumultuous period for the motor insurer, which has been hit by sluggish profits and payouts to customers it had overcharged. Last March, it posted pre-tax losses of £45m, down from the £446m profit posted in 2021, blaming the hit on soaring inflation, extreme weather and market volatility.
The company also agreed in July to repay customers £30m after it was found they had been overcharged for car and home insurance policies.
Adam Winslow, the former Aviva UK chief, is likely to take over as Direct Line’s chief executive in March, to replace Penny James, who stepped down last year.
In its release on Wednesday, Ageas said it was confident in the underlying attractiveness and future opportunities of the UK personal lines insurance sector.
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It said: “Over the long term, the UK personal lines sector has proven to be structurally profitable and, through its own UK operations, Ageas sees its strong potential.”
The Belgian-based firm added that it believed the combination of the two companies would lead to the creation of a strong personal lines franchise in the UK, with strong positions in its preferred business lines of household and motor insurance.