- £3bn January offer from Ageas rejected
- Belgian insurer offers expansion rationale but little to sway Direct Line shareholders
Direct Line (DLG) has rejected a £3bn buyout approach from Belgian insurer Ageas (BE:AGS). The proposal came in January but Ageas published details of its approach on Wednesday after a Bloomberg report, saying a combination would offer a "meaningful opportunity to unlock shareholder value through the delivery of significant operational and capital synergies".
Shareholders would have received 100p in cash and one Ageas share for every 25 Direct Line shares held.
Direct Line said the offer was “uncertain, unattractive”, and that it “significantly undervalued Direct Line Group and its future prospects while also being highly opportunistic in nature”.
Ageas, which has a €7bn (£6bn) market capitalisation, has a small UK business but largely operates in its home market of Belgium. Revenue is split evenly between life and non-life insurance. Buying Direct Line would “further strengthen Ageas' position in a European market where it already operates, whilst rebalancing Ageas' business profile towards controlled entities and non-life business”, the company said.
Direct Line shares climbed 24 per cent on the news, to 203p.
The UK insurance market suffered in 2023 as inflation and a surge in payouts knocked profits. Direct Line issued a profit warning in January 2023 after a winter freeze brought claimant levels way up, and suspended the dividend. The payout will only return when the car insurance unit’s “performance is consistent with pricing assumptions”, Direct Line said in its interim results last year.
The offer confirmation comes just days before new chief executive Adam Winslow joins. "Adam Winslow will take up the role as CEO on 1 March... He is tasked with refreshing the strategy and operational focus of the group with the clear objective of returning to a sustainable level of operating profit over time," Direct Line said.
