Direct Line has rejected an “opportunistic” takeover approach worth about £3.1 billion from Belgium-based rival Ageas, as it becomes the latest UK-listed company to be eyed by a potential buyer.
The car insurance giant said it thought the offer was “uncertain, unattractive, and that is significantly undervalued” the business.
Nevertheless, its shares soared by a quarter on Wednesday amid the takeover speculation.
Ageas revealed it was in the early stages of making a possible offer which would value Direct Line’s entire share capital at nearly £3.1 billion, paid for with existing cash and new debts.
The international insurance group, which is focused on Europe and Asia, said buying Direct Line would create a strong business in the UK with a focus on household and motor insurance.
It added that it saw “strong potential” in the personal lines sector, referring to any insurance policy taken out by individuals rather than businesses, and that the number of insurance claims have stabilised in the past year.
The market has also benefited from new pricing rules brought in last year which prevent renewing customers from being charged more than new customers, the firm said.
It comes after a turbulent period for Direct Line which was hit by higher motor cover claims last year, thanks to colder weather and rising costs.
It swung to a loss over the first half of 2023, with former boss Penny James stepping down last year in the wake of a profit warning and move to scrap its shareholder dividend.
But Direct Line said its directors unanimously rejected the proposal from Ageas at the end of last month.
“The board considered the proposal with its advisers and considered it to be uncertain, unattractive, and that it significantly undervalued Direct Line Group and its future prospects while also being highly opportunistic in nature,” it told shareholders.
Adam Winslow is set to take over as the chief executive from March.
On Tuesday, London-listed electricals giant Currys said it had rejected a second takeover approach from the US owner of Waterstones, Elliott Advisors.