Direct Line Insurance Group PLC (LSE:DLG) shares surged 7% on Friday following an agreement to be taken over by FTSE 100 insurance giant Aviva plc.
The proposed combination includes 129.7p in cash and the rest in new Aviva shares, plus a 5p dividend payment subject to board approval.
Aviva’s offer represents a 73.3% premium to Direct Line’s closing share price on November 27, when Aviva approached the group with its first, rejected takeover proposal.
Dan Coatsworth, investment analyst at AJ Bell, suggested that shareholders could push for a higher valuation, although “judging by recent City chatter, 275p should be enough to keep everyone happy and Aviva might be able to wrap this up fairly quickly”.
He continued: “Aviva has performed every step of the takeover dance flawlessly. It’s spotted a rival going through a weak phase and thrown its hat into the ring as an interested buyer with a low-ball price to test the water.
“It will have almost certainly known the first bid would have been rejected and it’s now come back with a higher and fairer offer, and Direct Line’s board has indicated it’s good enough."
Direct Line shares were swapping for 252.9p at the time of writing.