LONDON (Reuters) – British insurer Aviva (LON:AV) has reached an agreement to buy smaller rival Direct Line (LON:DLGD) in a 3.7 billion pound ($4.65 billion) cash-and-stock deal, the companies said on Monday, creating the UK's largest home and motor insurer.
Under the terms of the deal, 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 the form of dividend, Aviva said.
Aviva and Direct Line reached a preliminary agreement in early December. Aviva had until Christmas Day to make a formal offer or walk away under UK takeover rules.
Direct Line, under CEO Adam Winslow who joined the company from Aviva in March, has made efforts to energise a business hurt by an underperforming motor insurance arm.
The company missed expectations for half-year operating profit in September.
It has implemented aggressive price hikes to mitigate the rising costs of claims and announced plans in November to cut 550 roles, or about 5% of its global workforce.
The transaction is Aviva CEO Amanda Blanc's biggest acquisition to date as she tries to expand in the company's core markets of Britain, Canada and Ireland, after selling a series of overseas assets to simplify the business.
The deal will also allow Aviva to increase its dividend after completion, by a "mid single digit percentage", it said.
($1 = 0.7957 pounds)
Comments (0)