Direct Line rejects second takeover approach from Ageas, shares tumble

Direct Line tumbled on Wednesday after saying it had received and rejected a second takeover approach from Belgian rival Ageas as it continues to undervalue the group.

On 28 February, the London-listed insurer said it had rejected a £3.1bn offer from Ageas. This comprised 100p in cash and one new Ageas share for every 25.24 Direct Line shares, and implied a value of 233p per share.

The latest "highly conditional, non-binding indicative" proposal from Ageas, received on 9 March, is of 120p a share in cash and one new Ageas share for every 28.41 Direct Line shares. This has an implied value of 237p a share.

"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," it said. "Accordingly, the board unanimously rejected the latest proposal."

At 1040 GMT, the shares were down 9.6% at 204.22p.

Ageas chief executive Hans De Cuyper 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."

In a research note last month after the first takeover approach, Jefferies said Ageas would likely need to make an offer of 270p to 300p a share - more in line with recent M&A valuations in the sector - in order for it to be accepted.