DLG directors unhappy with insurer’s share price before accepting Aviva deal

Direct Line Group (DLG) directors were not happy with the insurer’s share price before Aviva’s £3.7bn takeover bid was officially accepted.

In a joint statement released yesterday morning (23 December 2024), the two firms announced that they had agreed on the terms of a cash and share offer.

The deal came amid DLG executing a new strategy after it suffered an operating loss from its ongoing operations of £189.5m in the 12 months to 31 December 2023.

Put in place by chief executive Adam Winslow, the strategy aims to removing at least £100m of costs by the end of 2025 on a run-rate annualised basis.

Winslow also oversaw the launch of the insurer’s signature brand, Direct Line, on price comparison websites (PCWs) for motor business.

A range of senior hires have also been made to help DLG execute its turnaround strategy.

However, despite early strategic progress, a statement said the DLG directors “do not believe that DLG’s share price and valuation was appropriately reflecting the potential for the business”.

It added that DLG’s share price was trading “close to a 12-month low prior to Aviva’s initial approach regarding a possible offer for DLG in November 2024”.

“Against this backdrop, whilst the DLG directors have considerable conviction in the delivery of DLG’s turnaround strategy under its new senior leadership team, it has concluded, alongside its advisers and following extensive consultation with DLG shareholders during the offer period, that Aviva’s offer to acquire DLG delivers DLG shareholders an attractive valuation of DLG today when taking into account the risks inherent in a multiyear turnaround and the prevailing market backdrop,” the statement continued.

Winslow comment

Under the terms of the deal, for each DLG share held, shareholders will receive 0.2867 new Aviva shares and 129.7 pence in cash.

Winslow said that while DLG “made fast progress on its turnaround strategy”, bringing DLG and Aviva together “offers the opportunity to create a strengthened and enlarged business”.

“Both organisations share a deep passion for serving customers and for supporting their people,” he added.

“In a highly competitive UK general insurance marketplace, the combined entity will be very well placed to deliver for its customers.

“I am proud of what DLG has achieved to date and this offer will enable the business to continue to succeed as part of a combined group with Aviva.”