 Derren Nathan, head of equity research at Hargreaves Lansdown, said: "The deal, a mix of cash, shares, and a small dividend, delivers a 73% premium to Direct Line's pre-offer price. Direct Line's board had been holding out, insisting they could make it on their own.
"But even they had to admit that Aviva's proposal is a golden ticket they'd struggle to match independently. Confidence in their solo strategy aside, this offer was just too good to pass up.
"Let's not sugarcoat it: Direct Line has hit some serious potholes lately. Market share has been sliding, underwriting hasn't exactly been flawless, and regulators have been knocking on the door. But with a fresh leadership team at the wheel, the company has been working on a bold turnaround plan.
"For Aviva, the price is pushing the limit of good value but snapping up Direct Line could be a strategic jackpot. It cements their place as a heavyweight in the UK home and motor insurance markets and brings fresh opportunities to steer Direct Line's transformation, while squeezing out efficiency gains from their combined scale." |
Good luck building a 29.9% stake with nobody finding out!!! |
At 30% you have to make mandatory offer for the company.
At 5% your holding is public so beyond that you cannot acquire a large stake by stealth.
For the 10% mark and at intervals higher, read the press on Drahi's stake building in BT a few years ago. He was required to formally state his intentions at these points.
At least, this is my understanding...like you, happy to be corrected and learn. |
Huckers,
Forgive me but I am not sure you are right there but happy to be corrected. I am not aware that there is any requirement in the UK for a company to state if they are intending to bid once they reach a 10% holding. The key is 30%. Yes going through the various thresholds apply as you state but start at 3% for UK companies. |
Above 5% you have to declare your holding. At 10% you have to make a statement as to whether or not you intend to make bid for the company or not (a commitment that lasts six months). Not sure how they would quietly build a 29.9% stake in the company given those notification requirements?... |
The possibility of government regulatory intervention can't be ruled out |
Gary, not how it works. |
But my point remains that they should’ve used internal resources and been buying in the market to get as close to 29.9% before having any discussions. They would’ve saved a fortune at over £1 a share. |
Yes Pete I agree one could certainly make the case that 2020/22 share price was not a true reflection of a true value of the company. |
I used the word "seems" to like it and Rongetsrich I agree that it remains to be seen if that will continue. However if the market had hated it then I think Av would have been vigourously sold off this morning.
Right now I'm still supporting the simplistic view that AV CEO is doing the right deal.
If Av had wanted to buy DL just a few years ago it would have cost at least 500p a share and probably inherited their future difficulties.
Today they are offering to buy DL at considerably less that 500p, while their problems are known and are being fixed.(hopefully already fixed), and if not this would/should come to light id due diligence. |
muscle, the DLG price in 2020-2022 was based on misleading /false accounting.
They were running down reserves to zero to continue paying a high, and as it turns out unsustainable, dividend (and BoD bonuses.
Since then, they cut out the dividend completely and have only marginally reinstated it, and they have also sold their commercial insurance arm.
By buying DLG (subject to competition clearance, which presumably they have investigated) AV. are doubling their 10% share of car insurance market, so will inevitably be able to improve margins across the entire business.
Both companies have lots of infrastructure whether head office or repair garages and the opportunities for cost control are enormous.
Av. are getting a good deal with DLG, even at 275p, particularly when paying part equity rather than all cash. |
I'm unconvinced that the city does like it.The initial rise was probably auto trades and now the city is reflecting.I would imagine we'll see a drop this afternoon when instructions are made at the institutions.This buy out is expensive, even before the restructuring and bonuses are factored in.Who are any of us to say it's a good deal, it's a long term strategic move, but now- make later. |
Should AV be uncomfortable with anything they come across during due diligence that impacts their calculations on benefits they can always withdraw. |
Sold out the balance of my Aviva this morning
Will wait to be taken out for my balance of shares in direct line prefer the cash
Good luck |
So roughy 372m dilution I’m assuming that’s the case. I hope the dividend is maintained.
(Based on 1.3b DL shares). |
Difficult for us to work out the exact benefits of the deal for AV shareholders although it would seem that the market quite likes it.
Worth noting that in 2020 DL share price was 350p and in 2022 300p before they lost the plot on repair costs etc.
That misstep is fixable (maybe partly or wholly fixed already), their customer volume is still good while insurance charges have increased significantly.Add in the synergies, cross selling etc...seems pretty good opportunity to me. |
.
Possible Offer = 129.7p cash + 5p divi + (0.2867 x Aviva share price)
Based on 489.3p per Aviva share, this equals 275p per DLG share (49% cash)
This represents a premium of:
o 73.3% to the closing Direct Line share price on 27 November 2024 (being the last closing share price before the offer period commenced); and
o 49.7% to the six month volume-weighted average Direct Line share price to 27 November 2024. |
They have overpaid. Compared to a hop, skip and a jump the BOD have just jumped. Lots saying c. 260 was good last night, yet saying 275 is good this morning.
This will pay off eventually, but overpaying just increases that recovery time. |
tornado126 Dec '24 - 07:21 - 20421 of 20426
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Have they got this at somekind of bargain price ?... I am not convinced, but I trust our CEO can squeeze out the top value out of this..
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Not a particularly good bargain for shareholders but a damn good one for the guys in the boardroom who'll pay themselves topping bonuses for the extra turnover.
(If you don't know who the mark is it's you (and me)).. we'll make pennies and they'll make millions. |
As a holder in both companies-like a lot on here-I'm reasonably satisfied with the deal struck. I think it's a fair price for DLG holders but an attractive entry price for Aviva too. The synergies, areas for cost cutting and cross selling will be huge. Plus, have they "bought" back the next CEO when AB steps down? ;-)
Overall reasonably happy with the outcome if it comes to pass and nobody else "muddies the water" with a counter offer(unlikely?). |
I'll be very happy to receive some AV shares (+cash) for my DLG holding. Just needs rubber stamping now as effectively an agreed offer given that the DLG BoD have said they will recommend to shareholders. |
Looks like a good deal. Looking at the 3 year share price this looks like a steal |
As a holder of both, but more weighted towards AV. I see this as fair and reasonable for both sides.
Good luck all 👍🏻 |
Looks like the major shareholders in DLG did want this deal after all but were waiting out for that increased offer..
275p seems a very fair price and should be a great deal for shareholders in both companies imo. |
Have they got this at somekind of bargain price ?... I am not convinced, but I trust our CEO can squeeze out the top value out of this.. Lets see how the market reacts.. GLA |
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