Aviva’s £3.7bn takeover of Direct Line approved by UK watchdog
Aviva’s acquisition of smaller insurance peer Direct Line has been approved by the competitions watchdog, paving the way for the formation of Britain’s biggest home and motor insurer.
The £3.7bn takeover will not be subject to a phase-two investigation, the Competition and Markets Authority (CMA) said on Tuesday, after a preliminary probe to assess whether a combination between the two would reduce competition in the UK insurance market.
The takeover became effective on Tuesday. Direct Line shares are expected to be delisted and cancelled by Thursday.
Aviva and Direct Line reached an agreement on the terms of the acquisition in December 2024.
The deal valued Direct Line shares at 275p, which marks a 73 per cent premium on the firm’s share price prior to the offer and a 50 per cent premium on its six-month average share price.
Direct Line previously rejected an offer that valued shares at 250p per share.
Shareholders in Direct Line will receive 129.7p in cash and a 5p dividend for each share owned, as well as 0.3 new Aviva shares as part of the deal.
CMA facing scrutiny
Whilst the CMA has approved the deal, it comes amid rising speculation the regulator will have its powers rowed back as the government looks to drive economic growth.
The watchdog is among 17 regulators Labour have asked to lay out proposals on how to ease business’ burden.
CMA Chair Marcus Bokkerink was ousted in January in what was dubbed the “most overtly political” regulatory intervention of recent years.
The Business Secretary said at the time: “This government has a clear plan for change – to boost growth for businesses and communities across the UK. As we’ve set out, we want to see regulators including the CMA supercharging the economy with pro-business decisions that will drive prosperity and growth, putting more money in people’s pockets.”