LONDON: Aviva Plc has announced that it has reached an agreement on the terms of a recommended cash and share offer for Direct Line Insurance Group.

The acquisition deal outlines that for each Direct Line share held, shareholders will receive 0.2867 new Aviva shares, 129.7 pence in cash, and up to 5 pence in dividend payments, subject to approval by the Direct Line Board.

Based on Aviva’s closing share price of 489.3 pence on November 27, 2024, this offer values each Direct Line share at 275 pence, placing the entire diluted share capital of Direct Line at approximately £3.7 billion.

This strategic acquisition builds upon Aviva’s strong performance over the past four years, cementing its transformation into a high-performing business with a clear strategy. The acquisition is expected to further accelerate Aviva’s momentum in the market.

Dame Amanda Blanc, Group Chief Executive Officer of Aviva, said: “This deal is excellent news for the customers and shareholders of Aviva and Direct Line. It builds on our track record of delivering four years of strong financial performance and, in line with our strategy, it accelerates our growth in capital light business.

Aviva and Direct Line share a deep commitment to excellence in looking after customers, and this will remain a top priority following the Acquisition. The financial strength and scale of the Combined Group means customers will benefit from competitive pricing, an enhanced claims experience and even better service.

The acquisition of Direct Line by Aviva will bring together a number of the UK’s leading brands in a more efficient business, which is very well positioned to generate strong returns for all shareholders.”

Danuta Gray, Chair of Direct Line, said: “The Board of Direct Line is pleased to recommend Aviva’s offer for the company, which delivers significant value for Direct Line Shareholders. The offer represents a substantial premium and reflects the attractiveness of Direct Line, a high quality business with powerful insurance brands, excellent customer focus, and exceptional people.

The Board of Direct Line has been very pleased with the progress made by its new management team, but Direct Line is in the early stages of an extensive turnaround, and it believes the offer allows Direct Line Shareholders to realise the value of their investment in the near term. Direct Line’s customers and employees will be joining an established, successful business with a wide array of insurance products that is well-placed to deliver for all its stakeholders.”

Adam Winslow, Chief Executive Officer of Direct Line, commented: “Direct Line is an excellent business, home to many well-loved insurance brands, and this year we have made fast progress on our turnaround strategy. Bringing Direct Line and Aviva together offers the opportunity to create a strengthened and enlarged business, with both organisations sharing a deep passion for serving customers and for supporting their people. In a highly competitive UK general insurance marketplace, the combined entity will be very well placed to deliver for its customers. I am proud of what Direct Line has achieved to date, and this offer will enable the business to continue to succeed as part of a combined group with Aviva.”

Background to and reasons for the Acquisition

In 2020, Aviva announced its strategic priorities, including plans to simplify its operations and become a leading Insurance, Wealth, and Retirement business. Since then, Aviva has refocused its portfolio on its core markets in the UK, Ireland and Canada, aiming to deliver profitable growth for shareholders whilst maintaining the financial strength to reinvest in the business, selectively pursue M&A and deliver additional shareholder returns.

As part of this strategy, Aviva has executed eight international disposals, rebuilt its financial strength, and enhanced its core businesses with bolt-on M&A, providing greater scale and capabilities. The proceeds from the disposals, combined with strong operational execution, have enabled Aviva to return £9 billion to shareholders between 2020 and 2023, while positioning the Aviva Group as the UK’s leading diversified insurer across Insurance, Wealth and Retirement.