Belgians tap up Chinese ahead of possible third bid for Direct Line
The boss of Belgian insurer Ageas is reportedly flying to China to meet its largest shareholder amid speculation he is trying to gather support to raise its £3.2bn takeover offer for Direct Line.
The Belgian insurer is said to be mulling another run at the UK operation after being rebuffed twice.
Ageas chief executive Hans De Cuyper is due to meet senior staff at Chinese conglomerate Fosun this weekend according to The Sunday Times. The group, which owns Wolverhampton Wanderers Football Club, holds a 10 per cent stake in Ageas.
The news comes after the firm made two cash-and-share offers to buy Direct Line which were unanimously rejected by the British insurer’s board, calling them “uncertain, unattractive” and “highly opportunistic”.
Ageas’ first offer valued Direct Line at roughly £3.1bn, while its second offer valued the company at some £3.2bn – around half of Ageas’ current market capitalisation.
Ageas is not proposing a shareholder vote on the deal but needs approval from investors to issue the new stock to fund a potential acquisition, meaning Fosun’s support could be crucial.
The City’s confidence in Ageas potentially taking over Direct Line appears to be low. Although its second offer valued Direct Line three per cent higher at 237p per share, the British firm’s stock price closed at 214p on Friday.
Sky News also reported last week that that one of Ageas’ top 10 shareholders was actively opposing its bid for Direct Line, saying it marked a strategic U-turn and ignored “significant headwinds”. Ageas declined to comment.
It is unclear whether Ageas will make a third offer for Direct Line. It has until 27 March to announce a firm intention either way and after the first rejection beefed up its advisory team by hiring Deutsche Bank.
This week will be crucial for Direct Line’s chief Adam Winslow, who only joined the company earlier this month.
The firm is due to report its full-year results on Thursday and update investors on its turnaround plan. Direct Line has said in response to Ageas’ offers that it is “confident of its standalone prospects”.
Direct Line’s shares have been weighed down by two profit warnings in two years, although they have soared 33 per cent since news broke of Ageas’ takeover efforts.
Ageas declined to comment when approached by City PM on De Cuyper’s reported trip to China.