Direct Line shares surge following Ageas offer to buy out U.K. insurer at 43% premium

By Louis Goss

Direct Line shares surged 25% on Wednesday following Belgian insurer Ageas' offer to fully-acquire the British insurance company for approximately GBP3.1 billion ($3.9 billion).

In a statement on Wednesday, Ageas confirmed it had offered to buy Direct Line at a 42.8% premium on its current share price, with a view to combining the company into its U.K. business.

Bloomberg subsequently reported that Direct Line had refused Ageas' offer. Direct Line was approached by MarketWatch for comment.

Ageas statements followed reports in Bloomberg early Wednesday that the Belgian insurer was planning to make an offer that saw Direct Line's share price surge.

The surge in Direct Line (UK:DLG) shares Wednesday followed a 12% fall year-to-date and a 53% loss of their value over the past five years. Ageas (BE:AGS) shares fell 2% having dropped 3% in 2024 so far.

Ageas' offer comes in the wake of a tough few years for Direct Line after its profits collapsed in 2022 due to inflation in the cost of motor parts and a surge in weather-related claims that saw the company scrap its dividend.

In August 2023, Direct Line appointed Aviva (UK:AV) executive Adam Winslow as its new CEO following Penny James exit from the company in the wake of the 2022 results.

The following month, Direct Line, which started in 1985 as the first U.K. company to sell car insurance policy directly to customers, sold its brokered commercial insurance business to Canada's Intact Financial for GBP520 million.

Winslow, who was previously CEO of Aviva's U.K. & Ireland division, is now set to start his new job at the top of Direct Line on Friday 1 March.

Ageas said acquiring Direct Line would strengthen its position in the U.K. and re-balance its business towards non-life insurance due to the British firm's speciality in car insurance policies.

The Brussels headquartered firm added that the fundamentals of the U.K.'s insurance market were now starting to improve, as the company said repricing initiatives were helping the sector keep up with inflation.

Analysts at Citi noted that previous insurance sector buyouts have seen Hastings snapped up at a 47% premium and Esure bought out at a 28% premium.

-Louis Goss

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02-28-24 0943ET

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