Analysts at Berenberg reckon the saga surrounding a possible Direct Line Insurance Group PLC (LSE:DLG) takeover has a few more chapters left.
The motor and home insurer confirmed last week that it had turned down a bid tabled by Aviva PLC (LSE:AV.), saying it was "highly opportunistic and substantially undervalued the company".
FTSE 100-listed Aviva’s offer valued Direct Line at 250p per share.
It was the second bidder that Direct Line has rebuffed this year, having rejected Belgian giant Ageas earlier in March.
According to Berenberg, Aviva could up its proposal to 275p per share, a 76% premium to the undisturbed share price.
This would value Direct Line at 10.2 times its projected 2026 earnings.
Berenberg analysts noted that Aviva could support a higher bid by reducing its group liquidity to £1 billion, suspending its share buyback for 2025, and modestly increasing leverage.
Berenberg also raised the prospect of a possible counteroffer from Ageas, which could revisit the Direct Line acquisition after its original bid was withdrawn earlier this year.
Ageas could table an offer of 265p per share, said analysts.
However, they said that Ageas's strategic synergies with Direct Line are less compelling than those Aviva could achieve, given Aviva's dominant UK market position in motor and home insurance.
As it stands, Berenberg has a 270p price target on Direct Line shares against a current spot price of 230p.