Brussels headquartered insurer Ageas has confirmed that it is in the initial stages of considering a possible offer to acquire the entire issued and to be issued share capital of UK insurer Direct Line Insurance Group Plc.
According to Ageas, the combination of its UK business with Direct Line’s will be positive for shareholders of both companies, providing an opportunity to “unlock shareholder value through the delivery of significant operational and capital synergies.”
The terms of the possible offer reveals that Direct Line shareholders would receive 100 pence in cash for each Direct Line share, and one newly issued Ageas share for every 25.24047 Direct Line shares.
Based on a Sterling to Euro exchange rate and the closing price of Ageas and Direct Line shares on 27th February 2024, the possible offer has an implied value of 233 pence per Direct Line share, representing a premium of 42.8% to 163.35 pence, being the closing price per Direct Line share.
Under the possible offer, the entire issued and to be issued ordinary share capital of Direct Line is valued at approximately £3.095 billion. Based on Ageas’ possible offer, Direct Line shareholders would own approximately 22% of the enlarged Ageas Group’s issued share capital, once the deal completes.
“The Proposed Transaction is in line with Ageas’ stated M&A criteria and Impact24 ambitions, as it would further strengthen Ageas’ position in a European market where it already operates, whilst rebalancing Ageas’ business profile towards controlled entities and Non-Life business,” says Ageas.
“Ageas is confident in the underlying attractiveness and future opportunities of the UK personal lines sector. Over the long-term, the UK personal lines sector has proven to be structurally profitable and, through its own UK operations, Ageas sees its strong potential. Over the last 12 months, many of the UK sector fundamentals have improved as claims patterns and frequency have stabilised, while an evolution towards a healthier and more predictable market is being observed thanks to developing regulatory clarity and pricing practice changes.
“The repricing implemented in the sector in response to elevated inflation levels further underpins its resilience. Ageas has made significant progress with the repositioning of its UK business, as communicated during its Investor Day in November 2023, and is confident that the UK will play an important role in Ageas’ future growth ambitions by further strengthening one of Ageas’ home markets,” adds the company.
Ultimately, Ageas believes that the combination of the two complementary UK businesses would create a strong personal lines franchise in the UK with key positions in Ageas’ preferred business lines of household and motor.
“This combination would benefit from highly complementary distribution models founded on the combination of Ageas’ strong relationships with intermediary distribution partners and Direct Line’s strong brand recognition for direct and Price Comparison Websites distribution. Furthermore, Ageas remains confident in its capacity to pursue sustainable and profitable growth through this transaction, underpinned by the delivery of operational synergies, scaling up the knowledge in domains like product innovation capabilities, best-in-class customer service and the unique ability to leverage Data Analytics,” says Ageas.
