29 February 2024 , 09:20
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Insurance giant Direct Line has turned down a takeover approach worth around £3. 1 billion from Ageas, a rival company based in Belgium.
It described the offer as "uncertain, unattractive, and that is significantly undervalued". Despite this, shares in Direct Line shot up by 25% on Wednesday because of the takeover speculation.
Ageas said it was still thinking about making an offer that would value all of Direct Line's shares at nearly £3. 1 billion. This would be paid for with money they already have and new loans.
Ageas, which mainly operates in Europe and Asia, believes buying Direct Line would make them a strong player in the UK, especially in home and car insurance. The company also said it sees "strong potential" in personal insurance policies, which are taken out by people rather than businesses.
They noted that the number of insurance claims has stayed steady over the past year. They also mentioned that new rules introduced last year, which stop companies from charging existing customers more than new ones, have helped the market.
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This news comes after a tough time for Direct Line, which had to deal with more claims for car cover last year due to colder weather and rising costs. Direct Line had losses in the first half of 2023.
The former boss, Penny James, left the company last year after they warned about profits and decided to stop paying dividends to shareholders. Direct Line said no to the takeover proposal made by Ageas at the end of last month.
They shared with their shareholders: "The board considered the proposal with its advisers and considered it to be uncertain, unattractive, and that it significantly undervalued Direct Line Group and its future prospects while also being highly opportunistic in nature,".
This March, Adam Winslow will become the company's new chief executive. On another note, electricals giant known as Currys, listed in London, announced on Tuesday that it turned down a second offer from the US owner of Waterstones, Elliott Advisors.