Aviva shareholders will hold the majority of the company’s shares 87.5%, while Direct Line shareholders will hold a much smaller portion, 12.5%.
Direct Line turned down Aviva's £3.28 billion bid back in November. Direct Line rejected this initial proposal stating that it did not adequately reflects the firm’s standalone value, describing the offer as “highly opportunistic” and not in line with its long-term potential.
A preliminary acquisition agreement was reached between the two insurers in early December, with Direct Line shares valued at 275 pence each, resulting in a total deal worth £3.6 billion.
Mutual Benefits - In its rationale for the initial offer, Aviva stated that acquiring Direct Line was motivated by the belief that the deal would be mutually beneficial for shareholders of both companies. Aviva argued that the acquisition would unlock value for Direct Line that it could not achieve on a standalone basis, while also generating significant cost and capital synergies.
Aviva, acquiring Direct Line would accelerate its strategic shift towards capital-light products and strengthen its return on equity. Direct Line’s perspective - Aviva would provide support from a larger, more diversified parent group with better credit quality.
Reduce Workforce - To achieve the expected benefits of the acquisition, workforce reductions are anticipated, the insurers stated. These reductions, stemming from overlapping functions across various departments, are estimated to affect roughly 5% to 7% of the Combined Group’s employee base.
However, Aviva plans to mitigate the impact of these reductions through several measures. First, the workforce reduction will be phased in over three years following the completion of the acquisition. Secondly, natural attrition will play a role, with Aviva noting an approximate turnover of 1,300 employees in the UK in 2024.
Furthermore, Aviva is committed to redeploying employees where possible. The company currently has approximately 800 UK-based vacancies and anticipates the creation of new positions as it continues to pursue its organic growth ambitions.
A preliminary acquisition agreement was reached between the two insurers in early December, with Direct Line shares valued at 275 pence each, resulting in a total deal worth £3.6 billion.
Mutual Benefits - In its rationale for the initial offer, Aviva stated that acquiring Direct Line was motivated by the belief that the deal would be mutually beneficial for shareholders of both companies. Aviva argued that the acquisition would unlock value for Direct Line that it could not achieve on a standalone basis, while also generating significant cost and capital synergies.
Aviva, acquiring Direct Line would accelerate its strategic shift towards capital-light products and strengthen its return on equity. Direct Line’s perspective - Aviva would provide support from a larger, more diversified parent group with better credit quality.
Reduce Workforce - To achieve the expected benefits of the acquisition, workforce reductions are anticipated, the insurers stated. These reductions, stemming from overlapping functions across various departments, are estimated to affect roughly 5% to 7% of the Combined Group’s employee base.
However, Aviva plans to mitigate the impact of these reductions through several measures. First, the workforce reduction will be phased in over three years following the completion of the acquisition. Secondly, natural attrition will play a role, with Aviva noting an approximate turnover of 1,300 employees in the UK in 2024.
Furthermore, Aviva is committed to redeploying employees where possible. The company currently has approximately 800 UK-based vacancies and anticipates the creation of new positions as it continues to pursue its organic growth ambitions.
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