Aviva raises bid for rival insurer Direct Line to £3.4bn, 4.4% higher than its rejected original offer

Aviva has raised its bid for rival insurer Direct Line to £3.4bn days after its initial bid was rejected.

The FTSE 100 firm has increased its offer to 261 pence for each Direct Line share, 4.4 per cent higher than its original offer of 250 pence.

Deliberations are ongoing and there is no certainty that Direct Line bosses will accept the new offer, Bloomberg reported.

Direct Line Shares fell in late trading in London after reports of increased supply emerged, with investors in “wait and see” mode.

They closed the day down 0.34 per cent, or 0.8p, to 236p. Aviva rose 1.87 per cent or 9p to 489.4p.

Direct Line and Aviva declined to comment.

Aviva shocked markets last week when it revealed it had approached Direct Line with a £3.3bn offer made up of a mix of cash and shares.

The offer was rejected outright by the troubled insurer, which said it was “highly opportunistic and substantially undervalued the company.”

But it has sparked speculation about a Christmas bidding war, with Aviva now contacting Direct Line shareholders directly in an apparent attempt to pave the way for a hostile takeover.

Some have predicted that Aviva may need to raise its offer further, possibly to £3.9bn, to seal the deal.

Under the city’s takeover rules, Aviva has until 5pm on Christmas Day to decide whether it wants to make a formal bid for Direct Line or walk away.

Direct Line successfully defended a takeover attempt by Belgian rival Ageas earlier this year.