Aviva PLC's (LSE:AV.) approach to rival Direct Line looks like a shrewd move, suggest analysts at KBW, which is sticking with its 'buy' recommendation after more reflection on the potential deal.
Now the news is out, the market has considered the probability of a need to raise the offer so KBW believes any downside from the usual arbitrage between buyer and seller is limited.
“On the other hand, should the deal fall through, Aviva presumably reverses any risk discount and gets applauded by investors for disciplined opportunism," the investment bank noted.
There risk of a counterbid persists but otherwise KBW says its "for" or in favour paragraph is longer than the “against" though it adds there is a risk to Aviva's share price if the market is taking a more complacent view about counter offers its logic suggests.
Otherwise, 'outperform' with a 545p target is the investment view.
In afternoon trading, the shares were 486p, up 0.5%.