Direct Line rejects improved £3.2bn takeover bid from Belgian rival Ageas

Direct Line has rejected an enhanced takeover bid from Belgian rival Ageas, which the insurer says still “significantly undervalues” the group.

Ageas’ latest offer of 120p cash per share, plus one newly issued Ageas share for approximately every 28.4 Direct Line shares, valued the company at £3.17bn.

This represented an increase of around 3 per cent on a previous offer of £3.1bn.

But Direct Line told investors on Wednesday that the offer, which has an implied value of 231 pence per share, is “uncertain (and) unattractive”, and undervalues ​​the group and its future prospects, “while being very opportunistic nature.

Hotline Actions They were down 5.2 percent to 214 pence in early afternoon trading.

The shares have added about 30 percent over the past year thanks to a boost in late February when Ageas made its first offering. They are down more than 40 percent in the last five years.

The FTSE 250 insurer, which has 10 million customers and is home to the Churchill and Green Flag brands, added it was “confident” in its independent prospects and advised investors not to take any action on Ageas’ bid.

Hans De Cuyper, CEO of Ageas, described the Belgian company’s latest offer as “compelling” and that it would provide “significant cash proceeds to Direct Line shareholders”, who would “benefit from the material value creation” it offers. the combination of companies.

But Direct Line boss Adam Winslow, who replaced Penny James last year, is expected to make the case for the insurer to remain independent and list in London alongside the company’s annual results on March 21.

Winslow’s plan is expected to outline ways Direct Line could become more tech-savvy, which could include setting up an app for the first time. He is also likely to propose cost cuts, according to The Mail on Sunday.

It follows a bleak few years for Direct Line shareholders, who have suffered multiple profit warnings.

Founder Sir Peter Wood told The Mail on Sunday in early March that the business had been run “so abysmally” for years that Direct Line deserved to be taken over.

The FTSE 250-listed company launched in 1985 as the UK’s first telephone insurer.

In January last year, Direct Line canceled its dividend after admitting it had been blindsided by a rise in claims for burst pipes caused by freezing weather.

It was later forced to refund around £30m to customers who were overcharged to renew their home and car insurance policies.

Direct Line posted a £76m loss in September. It sold a commercial insurance unit for £520m in an effort to shore up its balance sheet.

Analysts at UBS said last week that an acquisition by Ageas “makes strategic sense” as it would give the Belgian company “the potential to strengthen its position in an existing European market and rebalance its profile towards non-life insurance.” “.

They added: ‘The underlying attractiveness of UK personal lines insurance is improving, with the motor insurance cycle tightening, (and there are) greater cost synergies generated by a potential deal in the market than by an acquisition in a new geography.

‘We estimate (approximately) cost savings of €120 million (per year) after tax and assume an implementation cost of 1.5 times these potential cost synergies at (around) €180 million.

“We assume (approximately) €175 million of diversified capital synergies thanks to the increased diversification benefit and model optimization.”