January 13, 2025 | Insurance | Europe | Active
On 23-Dec-24, British insurer Aviva signed a definitive agreement to acquire its smaller rival, Direct Line, in a £3.7bn cash-and-stock deal. The recommended offer was preceded by a possible offer announcement in late November and a subsequent put-up-or-shut-up (“PUSU”) under UK takeover rules, scheduled to end on Christmas Day. The accepted terms were the same as those proposed – 129.7p in cash and 0.2867 Aviva shares for each Direct Line share. The merger parties will continue to pay dividends in-line with their respective and existing dividend policies, and the Rule 2.7 announcement confirms that Direct Line shareholders will be entitled to certain distributions, namely (i) up to 5p per Direct Line share, to be paid prior to closing, and (ii) up to 2p per Direct Line Share, should the deal not close by the record date of Aviva’s FY’25 interim dividend (i.e. around late August 2025). Of note, Aviva’s next dividend (FY’24 final, 23p per share) will trade ex- on 27-Mar-25, per Bloomberg. Based on closing prices on 27-Nov-24, the last undisturbed date, the offer consideration including Direct Line’s 5p dividend is 275p per share, representing a 73.3% premium to Direct Line’s undisturbed price on 27-Nov-24. The consideration will lead to Aviva shareholders owning 87.5% of the combined entity, while Direct Line shareholders will hold nearly 12.5%. Aviva intends to fund the cash portion of the offer consideration from existing cash and has secured £1.85bn through a facility agreement. The deal is structured as a UK court-sanctioned scheme of arrangement that requires Direct Line shareholder approval at a Court Meeting (75% in value) and an EGM (75% of votes cast). The scheme document is expected to be filed during the first half of February 2025, with shareholder meetings anticipated in March 2025. Direct Line directors intend to unanimously recommend that shareholders vote in favour of the scheme. The deal is also subject to regulatory approvals, including CMA antitrust and approvals from the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). Under the Cooperation Agreement, Aviva has agreed to use “all reasonable endeavours” to obtain ...
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