Insurer in play

Direct Line shares surge on Ageas takeover offer

Direct Line joined the stock market 12 years ago

Direct Line has rejected a £3.1 billion takeover bid that sent the insurer’s shares up by nearly a quarter.

The FTSE 250 motor and home insurance business, founded by Sir Peter Wood in the 1980s, received the cash and paper offer from Belgian firm Ageas last month.

However, it was dismissed by the board as “unattractive” and at a level that “significantly undervalued” its prospects.

Direct Line has suffered from a string of profit warnings and cancelled its dividend before CEO Penny James departed.

Adam Winslow has been hired from Aviva and will take over tomorrow when he will step into a potential bidding battle to hang on to the company’s independence.

The proposal from Ageas, revealed by Bloomberg, valued it at 233p a share, a 42.8% premium to Direct Line’s closing share price on Tuesday. News of its approach sent the British insurer’s shares surging by 38.75p, or 23.8%, to close at 202.5p last night as investors warmed to the prospect of a tie-up

Ageas offered investors 100p in cash per share and one new Ageas share for every 25.24047 shares they own in Direct Line.

The move for the company comes amid a flurry of interest in UK quoted companies from overseas. Currys, the electronics retailer, has turned away bids from Elliott, the American activist investor and private equity group, while Wincanton, the logistics company, has attracted French and American suitors. Glasgow-based Smart Metering Systems has recommended a £1.3 billion from the US-based investor Kohlberg Kravis Roberts.

Direct Line was founded in 1985 by Sir Peter Wood, the insurance entrepreneur, and Martin Long. It was backed by Royal Bank of Scotland and joined the stock market 12 years ago. It owns the Churchill brand and Green Flag, the roadside rescue service.

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