Ageas abandons DLG pursuit after two proposals rejected

Belgian insurer Ageas has announced that it will not be making a firm offer to acquire Direct Line Group (DLG) after two of its proposals were rejected.

Ageas announced a possible £3.1bn bid last month (28 February 2024) before improving the terms of this on 13 March 2024.

Both proposals were rejected by DLG, claiming they were “uncertain, unattractive and that it significantly undervalues DLG and its future prospects, while also being highly opportunistic in nature”.

Ageas has now said it walk away from any deal for the time being, with the firm “not able to identify additional elements based on publicly available information that would justify significant adjustments to the terms of its possible offer”.

The insurer added that while it sought engagement with the DLG board throughout the process, it “regrets that it has not been able to work collaboratively together” for any firm offer.

Hans De Cuyper, chief executive of Ageas, said: “We had hoped to reach agreement on a jointly recommended firm offer together with the Direct Line board.

“However, I am convinced that given the circumstances, we took the right decision not to make an offer, staying true to who we are and what we stand for in terms of maintaining a friendly approach and respecting our financial discipline.

“I sincerely want to thank our employees and advisors who delivered outstanding performance exploring this opportunity and our investors for their continued trust in our company.”

Rules

Under UK rules, Ageas is now bound by the restrictions set out in rule 2.8 of the Takeover Code.

This means that a firm or person that has said it does not intend to make an offer may not, within six months, take any steps in connection with a possible offer – unless of circumstances specified in the statement.

In Ageas’ case, it said it reserved the right to announce an offer or possible offer with the agreement of the DLG board of directors or if “a third party (including another publicly identified potential offeror) announces a firm intention to make an offer for Direct Line”.

DLG has said its board is confident in the insurer’s standalone prospects.

In its 2023 preliminary results, which were published last week (21 March 2024), DLG said it saw a “significant opportunity to remove at least £100m of costs by the end of 2025 on a run-rate annualised basis”.

It is making cuts after posting an operating loss from its ongoing operations of £189.5m in the 12 months to 31 December 2023.

“As communicated at DLG’s 2023 preliminary results on 21 March 2024, the board believes under Adam Winslow’s leadership the company is well-positioned to drive material improvement in performance that is expected to unlock significant value for DLG shareholders,” the insurer’s own statement said.