The British insurer Aviva PLC (GB:AV) has reportedly upped the ante with an increased takeover offer of £3.4 billion for its UK-based rival firm Direct Line Insurance Group PLC (GB:DLG). The revised offer comes just days after Direct Line rejected a £3.3 billion bid from Aviva, citing it as “highly opportunistic.” Aviva shares rose 1.06% on Thursday, while Direct Line shares surged nearly 7% in the afternoon before closing with a 0.42% gain.
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Direct Line Insurance and Aviva are among the leading insurance companies in the UK, offering a wide range of products.
Aviva Increases Bid for Direct Line
According to industry sources, Aviva is now offering approximately 261p per share for Direct Line, to persuade the company’s board to enter discussions. The revised offer is around 4% higher than Aviva’s initial cash-and-stock bid of 250p per share last week.
Both Aviva and Direct Line refused to give an official statement. As a result, it remains uncertain whether the latest offer will be sufficient to prompt Direct Line to enter negotiations.
In light of Aviva’s previous offer, Direct Line has reaffirmed its confidence in its leadership team in successfully implementing its turnaround plan. On the other hand, Aviva views this acquisition as a strategic move to enhance its UK expansion and expects significant cost and capital synergies.
Analysts Weigh in on Aviva’s Potential Takeover of Direct Line
Following the previous offer, Aviva’s stock received four analyst ratings, including two Buy recommendations. Meanwhile, DLG received four Holds and one Buy recommendation.
Earlier this week, analyst Farooq Hanif from J.P. Morgan confirmed a Hold rating on AV stock, predicting an upside of 13.5%. Hanif suggested that Aviva might have to increase its offer beyond 275p to secure approval from Direct Line’s board. Similarly, analysts at Berenberg Bank stated that Aviva has significant room to increase its bid.
Meanwhile, Thomas Bateman from Berenberg Bank believes that DLG’s management has a clear strategy for executing their plan. Bateman reiterated a Hold rating on DLG stock and raised the price target from 215p to 270p.
Is Aviva a Good Stock to Buy?
According to TipRanks, AV stock has received a Moderate Buy consensus rating, backed by eight Buy and four Hold recommendations. The Aviva share price target is 543.75p, which is 11.2% above the current trading level.
