Aviva (AV.L) is set to acquire smaller rival Direct Line (DLGD.L) in a £3.61 billion ($4.60 billion) cash-and-stock deal, creating the UK’s largest home and motor insurer. The merger will result in a combined market value of £16.65 billion ($21.23 billion), placing Aviva ahead of Legal & General and just behind Prudential in size, according to Reuters.

In a joint statement on Friday (6th Dec), the companies confirmed a preliminary agreement, with Direct Line expected to recommend the deal once a formal offer is made.
This acquisition marks a bold move by Aviva CEO Amanda Blanc, who has focused on strengthening the company’s position in core markets like Britain, Canada, and Ireland. The deal aligns with her strategy to prioritize less capital-intensive sectors, such as motor and home insurance.
Direct Line shareholders would receive 129.7 pence in cash and 0.2867 new Aviva shares for each Direct Line share, owning 12.5% of the merged entity. The proposal values Direct Line at 275 pence per share, an improvement on a previously rejected offer of 250 pence.
The merger would give the combined company over 20% market share in both home and motor insurance in the UK, with analysts expecting minimal regulatory concerns.
Aviva has until December 25 to formalize the offer under UK takeover rules. If successful, this would be Aviva’s largest acquisition under Blanc, following the company’s purchase of AIG’s UK life insurance unit and its re-entry into Lloyd’s of London earlier this year.
Direct Line’s shares surged 7.2% on the news, reaching a 2.5-year high, while Aviva shares dipped slightly by 0.3%.
The deal also reflects broader consolidation trends in the insurance sector, positioning Aviva as a dominant player in a competitive market.
Source www.reuters.com


