UK insurer Direct Line rejects Ageas' $3.9 billion buyout proposal

By Carolyn Cohn and Yadarisa Shabong

LONDON (Reuters) -British home and motor insurer Direct Line said on Wednesday it had rejected a 3.1 billion pound ($3.92 billion) offer from Belgium-based rival Ageas which "significantly undervalued" the company.

Direct Line's shares were trading up 24% at 204 pence at 1533 GMT. They had soared as much as 29% to a 13-month high after Ageas said it was proposing an offer valuing the FTSE 250 insurer at 233 pence per share, a 43% premium to Tuesday's closing price.

Direct Line said in a statement it had received the offer on Jan 19 and rejected it on Jan 29.

"The board considered the proposal with its advisers and considered it to be uncertain, unattractive, and that it significantly undervalued Direct Line Group and its future prospects while also being highly opportunistic in nature."

Earlier, Bloomberg News first reported Direct Line's rejection of the offer.

Direct Line, a household name for motor and home insurance in Britain, has had a rocky period since scrapping its dividend and parting ways with its chief executive in January 2023.

In September 2023, Direct Line sold its brokered commercial lines business to Canada's Intact Financial for 520 million pounds.

New CEO Adam Winslow is due to start this week.

In November, Ageas in an investor update reported a "successful transformation" of its UK business and a focus on growth in personal lines such as home and motor insurance.

Terms of the possible offer included Direct Line shareholders getting 100 pence per share in cash and one newly issued Ageas share for every 25.24047 Direct Line shares.

"Ageas will need to revise its offer with a higher price or larger cash component or both to convince the Direct Line board and shareholders," Panmure Gordon analysts said in a note.

BofA Securities is adviser to Ageas, Ageas said in its statement.

($1 = 0.7908 pounds)

(Reporting by Radhika Anilkumar and Yadarisa Shabong in Bengaluru and Carolyn Cohn in London; Editing by Shilpi Majumdar, Sinead Cruise, David Evans and David Gregorio)