Insurer Direct Line has seen shares drop after revealing it rebuffed a higher takeover approach from Belgium-based rival Ageas.
Shares in Direct Line fell 6% in Wednesday morning trading as it said the group had rejected a second cash-and-shares proposed bid from Ageas that was made on March 9, worth 237p a share – valuing the firm at around £3.11 billion.
It marks a 3% increase on the initial 231p-a-share approach made at the end of last month, worth around £3.1 billion.
Direct Line said: “The board considered the latest proposal with its advisers and continues to believe the latest proposal is uncertain, unattractive, and that it significantly undervalues Direct Line Group and its future prospects while also being highly opportunistic in nature.
“Accordingly, the board unanimously rejected the latest proposal.”
Ageas has until 5pm on March 27 to make a firm offer or walk away under City Takeover Panel rules.
Direct Line said it was “confident” in the firm’s “standalone prospects”.
“Direct Line Group will release its 2023 preliminary results on Thursday 21 March 2024 and will also then provide an update on further initiatives to build on the operational improvements implemented during 2023,” it added.
International insurance group Ageas, which is focused on Europe and Asia, insisted that its improved proposal is worth around 239p a share, based on currency exchange rates and the closing price of Ageas shares on March 12.
This would value Direct Line at £3.17 billion, it said.
It added that the second proposal also has an increased cash element.
Hans De Cuyper, chief executive of Ageas, said: “We have made a compelling possible offer that represents a substantial premium to Direct Line’s undisturbed share price.
“Our improved possible offer delivers substantial cash proceeds to Direct Line shareholders, whilst ensuring they benefit from the material value creation that we believe the combination of the UK businesses of Ageas and Direct Line will deliver.”
The group said it continues to “seek engagement” with the Direct Line board ahead of the March 27 offer deadline.
It argues that buying Direct Line would create a strong business in the UK with a focus on household and motor insurance.
“Ageas firmly believes that Direct Line being a part of a strong, diversified financial group will create resilience and stability, and that it would allow Direct Line, together with Ageas’ UK businesses, the flexibility to execute its strategic agenda,” Ageas said.
The takeover interest comes after a turbulent period for Direct Line, which was hit by higher motor cover claims last year due 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.
Adam Winslow took over as the chief executive from March 1.