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- Direct Line confirmed on Friday that Ageas does not intend to make a new offer
- Interest in takeovers had pushed the group’s share price higher over the past year
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Shares of Direct Line fell more than 10 percent on Monday as investors reacted to Belgian candidate Ageas’ decision to abandon its takeover efforts.
After the market closed on Friday, it was confirmed that Ageas would not make a new bid for Direct Line after two failed attempts.
Direct Line said the board was ‘confident in the group’s standalone prospects’.
Walked away: Ageas said it would not make a new bid for Direct Line after two failed attempts
The Brussels-based insurer’s last takeover attempt on March 13 valued Direct Line at 237p per share, or £3.2 billion. The insurer criticized the latest offer and labeled it ‘unattractive’.
It is a boost for chief executive Adam Winslow, who insisted the company he joined weeks ago had a “very successful future”.
The news will also come as a shot in the arm for the city, after electricity retailer Currys also battled foreign predators this month.
But Direct Line shares fell 13.3 per cent to 181.3p by midday, slashing last year’s gains to just under 30 per cent.
The shares have soared on Ageas’ takeover interest, but remain almost 50 percent lower than five years ago.
New boss Winslow last week set out his plans to revive Direct Line’s fortunes in his first set of results since taking over.
Direct Line opted to cut its dividend despite a huge increase in losses as it unveiled a cost-cutting program and a ‘comprehensive strategy review’.
The company plans to save £100 million a year by the end of 2025 and has increased its net underwriting margin target – the amount it earns from selling policies after payouts – to 13 percent by 2026.
Matt Britzman, equities analyst at Hargreaves Lansdown, said: ‘Recent takeover news has kept the shares afloat, and they have remained at that high level despite the board rejecting the offer.
‘Yes, performance improves and guidance at least offers a glimpse of hope for better things.
‘But there is still the question of whether that has more to do with a better market in general than with Direct Line itself. Restoring investor confidence will not happen overnight, but some first steps in the right direction have been taken.’
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