Shares in Direct Line Insurance Group PLC (LSE:DLG) rocketed 38% higher to 219p after it rejected a proposed £3.3 billion takeover by Aviva PLC (LSE:AV.).
The motor and home insurer confirmed on Wednesday evening that it had turned down the bid as it was "highly opportunistic and substantially undervalued the company".
This is the second bidder that Direct Line has rebuffed this year, having rejected Belgian giant Ageas earlier in March.
In a statement after market close on Wednesday, FTSE 100-listed Aviva said it made an offer on Tuesday last week of 112.5p in cash and 0.282 new Aviva shares for each Direct Line share.
Based on Aviva's closing share price last Monday of 487.6p, the bid valued Direct Line at 250p per share,
"Given Aviva's desire to reach a swift conclusion and to minimise distraction for both companies, Aviva presented a highly attractive Proposal with high execution certainty, which also met Aviva's strict financial criteria for acquisitions," it said.
The life insurer, which has a substantial general insurance business itself, said its offer represented a 59.7% premium to the closing Direct Line share price the day before the bid, and 55.9% to the average over a month.
However, Direct Line's shares topped 240p earlier this year and last left the shores of 250p in the summer of 2022.
The Direct Line board said it has "considerable conviction in the capabilities of our newly established leadership team and stands firmly behind their delivery of our strategy", which it added is making "early progress" towards financial targets.
"As such, the board considered the proposal to not reflect the standalone value that can be delivered by the company, and hence considered the possible offer highly opportunistic in nature," the statement added, noting that the board unanimously rejected the bid yesterday, 26 November 2024.
Aviva, which has a 'put up or shut up' deadline of 25 December under UK takeover rules, noted that the Direct Line board has since "declined to engage further".
It said it believes the acquisition "would be consistent with its strategy to accelerate growth in its UK businesses and further pivot the group towards capital-light business lines".
Adding that it sees the UK personal lines market as highly attractive, Aviva said it believes an acquisition of Direct Line would deliver "attractive returns" for both sets of shareholders, "including unlocking value that is inaccessible to Direct Line standalone", and delivering "material" cost and capital synergies on top of Direct Line's existing cost savings programme.
These comments seemed to suggest there could be a further offer in the making and/or that Aviva might be looking for Direct Line's major shareholders to put some pressure on the board to engage.
** Update: Adds share price **