Aviva has reached an agreement to acquire Direct Line Group for £3.7bn the two companies announced today, but around 2,000 jobs may go.
Direct Line shares have been valued at £2.75 and upon completion Aviva will own about 87.5% of the combined group with Direct Line shareholders owning approximately 12.5% of Aviva.
Direct Line has extended into many types of insurance since being founded including life and critical illness which is provided by Aviva owned AIG Life.
It launched in 1985 with just over 60 employees with just one product – car insurance – which was sold only via phone, and its brands now include Churchill, Green Flag, Privilege and Darwin.
With a combined workforce of 33,000 people, national media reports have suggested that between 1,600 and 2,300 employees of Aviva and Direct Line could lose their jobs as a result of the acquisition, with a headcount reduction of between 5% and 7%.
Amanda Blanc, Group CEO of Aviva (pictured) argued the deal was “excellent news for the customers and shareholders“ of Aviva and Direct Line.
“It builds on our track record of delivering four years of strong financial performance and, in line with our strategy, it accelerates our growth in capital light business,“ she said.
“The financial strength and scale of the combined group means customers will benefit from competitive pricing, an enhanced claims experience and even better service.
“The acquisition of Direct Line by Aviva will bring together a number of the UK’s leading brands in a more efficient business, which is very well positioned to generate strong returns for all shareholders.”
And Danuta Gray, chairperson of Direct Line, said the board of Direct Line recommend Aviva’s offer as it delivered “significant value“ for Direct Line Shareholders, representing “a substantial premium“.
“Direct Line’s customers and employees will be joining an established, successful business with a wide array of insurance products that is well-placed to deliver for all its stakeholders,“ Gray added.