Shares in Direct Line Insurance Group PLC (LSE:DLG) fell almost 5% to 215p after the insurer's board rejected a new offer from Belgian giant Ageas that included a larger proportion of cash.
The latest proposal was made last week but the FTSE 250 company announced its rejection late morning on Wednesday.
Ageas's new offer is made up of 120p in cash and one new Ageas share for every 28.41107 Direct Line shares. It values Direct Line at £3.17 billion.
Based on closing prices the day before the offer (last Friday) it implied a value of 237p per Direct Line share, an increase in value of approximately 3% relative to the implied 231p of the first proposal.
Before news of the first offer emerged at the end of last month, the shares were trading at just over 163p, with the initial approach being at a 43% premium to the previous night’s close and implied a value of £3.1 billion.
"Unattractive and opportunistic"
The Direct Line board said in today's statement that they consider the latest possible offer to be "uncertain, unattractive, and that it significantly undervalues Direct Line Group and its future prospects while also being highly opportunistic in nature".
Accordingly, it was unanimously rejected.
Ageas pointed out that the cash component was upped from 100p to 120p, covering 73% of Direct Line’s share price before the first offer went public, "whilst retaining exposure to the significant value creation upside from the delivery of cost and capital synergies through their c.20% ownership of the enlarged Ageas Group".
Ageas CEO Hans De Cuyper said: “We have made a compelling possible offer that represents a substantial premium to Direct Line’s undisturbed share price."
He said the new 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."