Ageas bumps bid for Direct Line, gets rebuff from target & markets

Belgian-French multinational insurer Ageas upped its preliminary takeover bid for UK rival Direct Line, then received a second cold shoulder for an offer still called “uncertain, unattractive and ... opportunistic.” 

Ageas upped the per-share cash component of its offer by 20% to £P1.20, then trimmed the equity component in turn. Direct Line calculated the offer at £2.37 per share or neighbourhood £3.1 billion against previously reported diluted share counts, a 3% increase from the preliminary offer. 

Direct Line prefers to frame its bid as a 46% premium to the share prices prevailing right before its initial bid triggered a market rally. 

Ageas reiterated its view to “the underlying attractiveness and opportunities of the UK personal lines sector” and that a merger will be beneficial for all sides. 

Stock market investors had been initially sceptical, lifting shares only 57% of the way to the Ageas bid price, then only slowly pushing shares to within 10% of the bid. 

Investors seemed to consider the revised offer skimpy, a discouraging signal for the deal overall. Shares were down by a quick 9% before gaining some traction and trading with a 6% loss into the mid-afternoon. 

Ageas submitted its initial bid in mid-January, a development which went public only end-February. 

Ageas likes the asset for the added European market share,  with what it considers a needed tilt towards non-life business and the improving outlook for UK personal lines, chiefly homeowners and motor.  

Distribution models look “highly complementary,” Ageas said of its own strength in intermediary partnerships and Direct Line's strength in direct channels and on price comparison sites.

Direct Line, in turn, likes its own stand-alone outlook, citing its “strong strategic position, powerful brands, and robust capital position.” Direct Line is set to take on a new CEO, Adam Winslow, who has been tasked with “refreshing the strategy and operational focus” with a goal or “returning to a sustainable level of operating profit over time.”

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