Finance
UK insurer Aviva to buy Direct Line in $4.65 billion deal
Global Banking & Finance Review®
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LONDON (Reuters) – British insurer Aviva has reached an agreement to buy smaller rival Direct Line in a 3.7 billion pound ($4.65 billion) cash-and-stock deal, the companies said on Monday, creating the UK’s largest home and motor insurer.
LONDON (Reuters) – British insurer Aviva has reached an agreement to buy smaller rival Direct Line in a 3.7 billion pound ($4.65 billion) cash-and-stock deal, the companies said on Monday, creating the UK’s largest home and motor insurer.
Under the terms of the deal, for each Direct Line share held, shareholders will receive 0.2867 new Aviva shares, 129.7 pence in cash and up to 5 pence in the form of dividend, Aviva said.
Aviva and Direct Line reached a preliminary agreement in early December. Aviva had until Christmas Day to make a formal offer or walk away under UK takeover rules.
Direct Line, under CEO Adam Winslow who joined the company from Aviva in March, has made efforts to energise a business hurt by an underperforming motor insurance arm.
The company missed expectations for half-year operating profit in September.
It has implemented aggressive price hikes to mitigate the rising costs of claims and announced plans in November to cut 550 roles, or about 5% of its global workforce.
The transaction is Aviva CEO Amanda Blanc’s biggest acquisition to date as she tries to expand in the company’s core markets of Britain, Canada and Ireland, after selling a series of overseas assets to simplify the business.
The deal will also allow Aviva to increase its dividend after completion, by a “mid single digit percentage”, it said.
($1 = 0.7957 pounds)
(Reporting by Chandini Monnappa and Aby Jose Koilparambil in Bengaluru and Lawrence White in London; Editing by Varun H K and Mrigank Dhaniwala, Kirsten Donovan)
An acquisition is a corporate action in which one company purchases most or all of another company's shares to gain control. This can help the acquiring company expand its operations and market presence.
A cash-and-stock deal is a type of acquisition where the purchasing company offers both cash and its own shares as payment to the shareholders of the company being acquired.
A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. Dividends can be issued in cash or additional shares.
Operating profit is the profit a company makes from its core business operations, excluding any income derived from non-operational activities such as investments or sales of assets.
A takeover occurs when one company makes a bid to assume control of another company. This can be friendly or hostile, depending on the target company's response.
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