The British insurer Aviva has reached an agreement to acquire Direct Line for about 3,700 million pounds (4,457 million euros) in cash and shares and contemplates the reduction of between 5% and 7% of the workforce of the combined group, which would mean the departure of about 2,300 workers.
In a statement sent to the London Stock Exchange, the boards of directors of Aviva and Direct Line have reported the agreement reached on the terms of the offer, which values each Direct Line share at 275 pence and the company as a whole at 3.7 billion pounds.
Specifically, the accepted proposal contemplates the cash payment of 129.7 pence and the delivery of 0.2867 Aviva shares for each Direct Line share, as well as the payment of up to 5 pence in the form of dividends to be paid before the closing of the transaction and subject to approval of the board of Direct Line.
The purchase proposal accepted by Direct Line represents a 12% improvement compared to the price proposed by Aviva in the offer that its domestic competitor rejected in November. Likewise, in March of this year, Direct Line had already rejected a purchase offer for 3.15 billion pounds (3,794 million euros) by the Belgian company Ageas.
Upon completion of the transaction, Aviva shareholders are expected to own approximately 87.5% and that Direct Line shareholders control approximately 12.5% of Aviva’s issued and to-be-issued share capital.
“This agreement is excellent news for Aviva and Direct Line customers and shareholders,” he said. Amanda WhiteCEO of Aviva, who highlighted the financial strength and scale of the combined group, adding that Aviva’s acquisition of Direct Line “will bring together several of the UK’s leading brands into a more efficient business.”
On your side, Danuta Graypresident of Direct Line, believes that Aviva’s proposal “delivers significant value for Direct Line shareholders” and represents a substantial premium.
Synergies
Aviva plans to achieve pre-tax cost synergies at an annual rate of at least £125 million (€150 million) by the end of the third full year post-closure, “which would drive compelling value creation for all of the group’s shareholders.” combined.
To realize these cost synergy benefits, one-time integration expenses of approximately 250 million pounds (301 million euros), of which approximately 75% is expected within the first two years after completion.
In this sense, Aviva points out that these synergies would be additional to the cost savings program previously announced by Direct Line of 100 million pounds (120 million euros) at an annual rate by the end of 2025.
Cost synergies from the acquisition are expected to be achieved through a reduction in overlapping roles in the combined insurance operations, economies of scale and increased efficiency, the integration of duplicate back office and middle office IT platforms ‘, as well as streamlining support teams and reducing overlapping roles across a number of shared services, head office and senior management functions.
In addition, Aviva’s board believes that significant additional value can be created by realizing incremental capital, reinsurance, claims and revenue synergies.
Template settings
Aviva’s board anticipates that, to achieve the expected benefits of the acquisition, there will be a reduction in the workforce as a result of overlapping functions, including operational, shared services, group/headquarters and senior management functions. address.
Overall, the insurer estimates that this will affect between 5% and 7% of the combined group’s employee base, which would exceed 30,000 workers, which would translate into the departure of approximately 2,300 employees.
In this sense, Aviva hopes to mitigate the expected adjustment with a gradual reduction over the course of three years after the closing of the operation, as well as through the natural reduction of the workforce and seeking the relocation of employees when possible.
“Any change in the workforce would be subject to comprehensive planning and all necessary information and consultation with affected employees and/or their representatives in accordance with applicable legislation,” explained the entity, which does not plan to make any other adjustments. personnel materials beyond what is indicated.
In November, Direct Line announced a series of initiatives aimed at simplifying its organization and saving costs by 2025, including a reduction of around 550 jobs from a workforce of around 10,131 people.
#Aviva #agrees #purchase #insurer #Direct #Line #million #euros
