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FINANCIALS: Direct line rejects Aviva's bid out of hand

FINANCIALS
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Wednesday evening Aviva made an offer to buy direct line for 250p per share. Management dismissed the offer out of hand. While a premium in the high 50's looks generous, DLG management also rejected a 237p bid from Ageas in March. The following day Direct Line's share price increased from 158.7p to 224.4p, showing that the market sees a reasonable probability of some sort of deal going through. The AVLN share price was marginally down yesterday, showing no great enthusiasm for potentially paying a higher price than 250p. 

While shareholders at AVLN aren't yet jumping for joy, analysts point to a potential deal as a good way for AVLN and DLGLN to quickly deploy excess capital that resides on both balance sheets, rather than a more gradual capital return in the form of share buybacks. Several large European banks and insurance companies have excess capital on balance sheets. This is partly what is fuel the current M&A pickup in the sector. 

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Wednesday evening Aviva made an offer to buy direct line for 250p per share. Management dismissed the offer out of hand. While a premium in the high 50's looks generous, DLG management also rejected a 237p bid from Ageas in March. The following day Direct Line's share price increased from 158.7p to 224.4p, showing that the market sees a reasonable probability of some sort of deal going through. The AVLN share price was marginally down yesterday, showing no great enthusiasm for potentially paying a higher price than 250p. 

While shareholders at AVLN aren't yet jumping for joy, analysts point to a potential deal as a good way for AVLN and DLGLN to quickly deploy excess capital that resides on both balance sheets, rather than a more gradual capital return in the form of share buybacks. Several large European banks and insurance companies have excess capital on balance sheets. This is partly what is fuel the current M&A pickup in the sector. 

Keep reading...Show less