The deal values Direct Line shares at 275 pence each, a notable increase from the 250 pence per share offer made by Aviva on November 19, 2024. The earlier offer was rejected by Direct Line, which stated it did not sufficiently reflect the company’s standalone value. The revised offer represents a premium of 73.3% over Direct Line’s closing share price on November 27, 2024, and 49.7% over its six-month volume-weighted average price as of the same date.

Following extensive deliberations with advisers and consultations with shareholders, Direct Line’s Board indicated it would likely recommend the new offer to shareholders, contingent on the completion of customary reciprocal due diligence and the agreement of all terms and conditions.

If the acquisition proceeds, Direct Line shareholders would own approximately 12.5% of the combined entity’s share capital.

In a joint statement, Direct Line’s Board highlighted the deal’s potential for synergies, stating, “In addition to the attractive headline value per share, the combination would provide the opportunity to deliver significant synergies, creating substantial additional value for both sets of shareholders.”

Aviva views the acquisition as an opportunity to unlock value that Direct Line could not achieve independently while delivering attractive returns to both companies’ shareholders. The company expects to realise significant cost and capital synergies, complementing Direct Line’s ongoing cost-saving initiatives.

From a broader perspective, Moody’s Ratings described the potential deal as credit-positive for both companies. For Aviva, the acquisition aligns with its strategy of shifting towards capital-light products, which could bolster its return on equity. For Direct Line, the partnership would offer support from a larger, more diversified parent company with stronger credit quality.

“Direct Line’s high-profile brands and strong market position would also reinforce Aviva’s already robust UK franchise, though it would increase Aviva’s dependence on the UK market,” Moody’s analysts noted.

UK investment bank Peel Hunt emphasised that the merger would solidify Aviva’s position in the UK personal lines insurance market, particularly in the motor segment, boosting its market share to 22%. This comes at a time when motor insurance rates are peaking and regulators are scrutinising underwriting practices in the UK motor market.

If finalised, the acquisition would mark a major shake-up in the UK insurance landscape, positioning Aviva as a dominant player while offering Direct Line shareholders an opportunity for value realisation amid challenging market conditions.

Join Aviva Leaders at Insurtech Insights Europe 2025 in London

Join Aviva leaders at Insurtech Insights Europe 2025 on March 19 to 20th at The O2 Intercontinental, London. Multiple leaders at Aviva are confirmed to offer valuable insights at the event. For more information, visit here: ITI Europe 2025