Blanc delivers direct hit: Aviva boss’s attack on rival shouldn’t come as a big surprise, says ALEX BRUMMER

The turnaround at Aviva under chief executive Amanda Blanc has been extraordinary.

Superfluous overseas businesses have been sold, cash has been returned to shareholders and Blanc has built up a war chest of investments.

The decision to bid for Direct Line, the company that revolutionized the way car insurance is sold, shouldn’t come as a big surprise.

Founded by insurance businessman Peter Wood, Direct Line has fallen into disrepair in recent times and has been abandoned by other general insurance innovators, notably Cardiff-based Admiral.

Aviva’s offer price of 250 pence per share, a 57.5 per cent premium to the closing share price, places a value of £3.3bn on Direct Line and was intended to be a take-out offer that would encourage Chairman Danuta Gray and CEO Adam Winslow, an Aviva émigré, entered into talks.

But until last night there was no communication. By going public, Blanc has effectively become hostile.

Aviva shareholders will be assured that the new ambition shown by Britain’s strongest insurance brand will not affect promises made to return capital to investors.

In terms of scale, Aviva, with a market value of £13.1bn, is a goliath to Direct Line’s midget. However, in the insurance world the agreement is important: Direct Line represents just under 9 million policies.

Not all insurance offers turn out well. The merger agreed between Royal Insurance and Sun Alliance back in the 1990s was a failure that left an indelible mark on the sector.

The current proposed deal is effectively a bailout for a company that has fallen on hard times. But this year even generous premiums over market value have been rejected by shareholders of UK-listed companies.

Blanc and his team are not yet home and dry.

royal plunder

The track record of key UK industries falling into foreign hands is not a happy one. There is hardly a day when Thames Water is not in the headlines, as a result of labyrinthine finances, leaking pipes and sewage leaks. Some parts of the UK car industry, such as the BMW-owned Mini, work.

But the foreign ownership of Vauxhall and Ford, which are declining in Britain, means that decisions about jobs in the era of electric vehicles are being made in the Netherlands (Stellantis’ nominal headquarters) and Detroit.

Despite this unfortunate experience, Business Secretary Jonathan Reynolds shows no inclination to intervene in Czech billionaire Daniel Kretinsky’s £3.6bn bid for International Distribution Services, owner of Royal Mail.

Hopefully Reynolds and his Business Department have delved into Kretinsky’s past business connections in Eastern Europe and those of his partners in the bidding EP group.

Reynolds may not feel any sentimentality about selling Britain’s oldest corporation. However, high-cost, multi-layered financing by a consortium of foreign banks is, like Thames Water, an invitation to financial plunder at the expense of consumers.

We know from other overseas acquisitions that promises about jobs, investment and modernization may seem irrefutable, but they cannot be enforced because business conditions change so quickly.

Labor may feel they have joined the good guys by allowing the deal for Royal Mail to go ahead in the name of foreign investment. You are in danger of contributing to a cycle of financial ruin.

crosbie hit

Debbie Crosbie’s raid on Virgin Money has proven shrewd. A disappointing half-year for Nationwide, Britain’s largest mutual financial group, is masked by a £2.3bn payday following its takeover of the bank.

Nationwide’s coup illustrates how foolish it is for the boards of FTSE 350 companies to be sold for what appears to be a generous premium when the underlying value is much higher.

As things stand, it seems certain that despite Nationwide’s profits falling 43 per cent to £568m in the first half, members can expect a “fairer share” payout after Virgin’s windfall Money.

Virgin shareholders and customers have reason to feel aggrieved. Virgin’s board sold them short and borrowers and depositors will see Nationwide customers benefit while getting nothing.

It is not in the interest of Nationwide, which sings the mutual song so loudly, for Virgin Money customers to be treated as second-class citizens. Disappointing.