Ageas drops Direct Line takeover bid; can’t justify major sweetener

Belgian-French multinational insurer Ageas has dropped its would-be takeover bid for UK rival Direct Line, having met unrelenting opposition from Direct Line leadership and clear disappointment from minority shareholders. 

Ageas remains convinced that its deal “would have created significant value for both groups of shareholders,” but can't be drawn to the type of bid markets sought or Direct Line might appreciate.  

“Ageas was not able to identify additional elements based on publicly available information that would justify significant adjustments to the terms of its possible offer,” management said in announcing its withdrawal from the would-be takeover process.

Ageas originally submitted a preliminary takeover bid for the whole of UK rival Direct Line back in mid-January with an eye to “significant” synergies available for the combined groups on the UK market.

Ageas led with a cash and equity offer , very roughly 3 parts equity for every two parts cash, would value Direct Line at £2.33 per share, above £3 billion when counted against the mid-2023 diluted share count.

Direct Line said it found the offer “to be uncertain, unattractive, and that it significantly undervalued Direct Line Group”. Given the timing vis-a-vis Direct Line's own plans for a tur-around, the deal was said to look “highly opportunistic in nature”.

Ageas responded with a mild 3% hike in its bid price and further addressed some investor concerns by shifting more of the price to cash from equity. 

That still left the price some 12% below what many equity analysts had considered a minimum threshold and still generated a rebuff of  “uncertain, unattractive and ... opportunistic” from Direct Line. 

 Shares of Direct Line, which had initially only closed half the gap to the Ageas bid and never came within 5% of the final bid, fell some 13% Monday morning to follow the news. 

Shares found early traction at 181.05p, some 11% above levels which had prevailed before the onset of the takeover saga, suggesting rather limited hope for an enticing rival bid.

Ageas continued to talk up the value of its discarded offer and “the underlying attractiveness and future opportunities of the UK personal lines sector”. 

Ageas UK will continue to “execute its focused personal lines insurance strategy alongside its valued distribution partners”.

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