Tensions flair at Direct Line following Aviva takeover bid

Sunday 01 December 2024 12:42 pm

A battle is brewing inside Direct Line over whether or not to simply accept any additional takeover bids from Aviva, as its CEO seeks extra time to show the enterprise round.

Speaking to the Sunday Instances following the rejected £3.3bn bid from Aviva final week, Direct Line CEO Adam Winslow urged shareholders to again his turnaround plan over accepting the deal from Aviva.

“We’re making glorious progress within the early levels of a major turnaround, with a refreshed and world-class management crew in place to ship the technique,” he stated.

“Folks like to speak Direct Line down, however since arriving as CEO in March, and having acquired two takeover bids already, it’s clear we’re a really enticing firm.”

Animosity has flared up between the 2 firms as Direct Line’s CEO, CFO, COO and chief danger officer all just lately joined from Aviva.

Over experiences of a tense relationship with Aviva CEO Amanda Blanc, Winslow stated: “I respect her… she’s doing her job, however I’ve obtained my job to do, which is to drive worth for shareholders”.

The Metropolis started bracing for a bidding struggle final week as hypothesis has unfold that Aviva may mount a hostile takeover try, whereas others have mentioned the opportunity of a counter-bid from Belgian insurer Ageas.

Direct Line already rebuffed two approaches from Ageas this 12 months, with the latter valuing the agency at £3.1bn. The board unanimously rejected Ageas’ method again in March, describing it as “extremely opportunistic”.

Rumours have additionally begun to swirl that Aviva could also be contacting Direct Line shareholders immediately, urging them to push Direct Line’s board into negotiations.

Whereas the corporate’s board rejected the supply from Aviva, its founder Peter Wooden has stated the agency ought to settle for a suggestion if Aviva raised its bid by 10 per cent.

In the meantime, analysts have argued that the insurer ought to settle for any additional bids, noting that the agency has didn’t ship persistent progress in its core companies over the past decade.

“The supply exceeds honest worth estimates for Direct Line, and given the difficult targets outlined through the Capital Markets Day, accepting this deal, or a better one, from Aviva is smart.” stated Henry Heathfield, fairness analyst at Morningstar.

“Direct Line is a no-moat enterprise with a excessive uncertainty and poor capital allocation due to continued investments in expertise, which haven’t resulted in a tangible enterprise improvement that occurred for different corporations.”

Different analysts, resembling these at Panmure Liberum, have additionally described the bid as a “good opening supply”.

Below UK takeover guidelines, Aviva has till Christmas Day to announce an intention to make a agency supply or stroll away.