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Highlights:
Direct Line Insurance rejects a £3.28 billion takeover offer from Aviva, citing undervaluation.
Direct Line shares surged by over 36% in early trading, while Aviva's shares declined.
The takeover offer must be finalized or withdrawn by December 25, according to UK takeover rules.
Direct Line Insurance has rejected a takeover offer of £3.28 billion from its larger rival, Aviva, (LSE:AV) deeming the bid as "substantially undervalued." The insurer announced its decision after market hours on Wednesday, sending its shares soaring by more than 36% during Thursday's early trading. At one point, the stock reached a high of 220 pence, marking the highest level in over eight months.
Despite the significant increase in Direct Line's stock price, it remains below the £2.50-per-share offer from Aviva. In response to the news, shares in Aviva fell by approximately 3%, making it the top percentage loser on the FTSE 100 index. The move by Direct Line reflects the company’s stance on the offer, underscoring its belief that the proposed price does not adequately reflect its value.
Under British takeover regulations, Aviva has until December 25 to either make a firm offer or walk away from the deal. Analysts from Jefferies have suggested that a revised, higher bid could emerge if Direct Line's board decides to engage further with Aviva.
This latest development adds to the ongoing market speculation about the future of both companies, particularly in the context of the competitive insurance industry. The outcome of this potential takeover will depend on further negotiations, as well as the response from shareholders and regulatory bodies. The situation continues to evolve, with market observers closely monitoring any updates leading up to the December deadline.
