Direct Line Insurance today revealed its support for a £3.6 billion takeover by rival Aviva.
The new cash and shares proposal values the Churchill and Green Flag business at 275p-a share.
In property, Berkeley has posted lower half-year profits while lender Halifax has revealed a jump in November’s average house price.
FTSE 100 Live Friday
- Direct Line set to back Aviva offer
- Berkeley outlines 10-year plan
- House prices in big jump
Market update: Berkeley 10-year plan fails to lift shares, Serco down 3%
10:13 , Graeme EvansDealmaking Aviva held its value in the FTSE 100 index today after it moved to the brink of capturing Direct Line Insurance in a takeover worth £3.6 billion.
The companies have agreed on a price of 275p-a-share, an increase of 10% on Aviva’s initial tilt that Direct Line said “substantially undervalued” the business.
The Churchill and Green Flag owner called the new price “attractive”, with potential upside as shareholders will be left owning 12.5% of a larger Aviva.
The proposed takeover package is made up of 129.7p a share in cash, plus 0.2867 new Aviva shares per Direct Line share and dividend payments of up to 5p.
Hargreaves Lansdown analyst Matt Britzman said: “Direct Line’s board had been holding out, insisting they could make it on their own.
“But even they had to admit that Aviva’s proposal is a golden ticket they’d struggle to match independently. Confidence in their solo strategy aside, this offer was just too good to pass up.”
The move looks set to strengthen Aviva’s market share in UK motor insurance to an estimated 22%, with the opportunity for significant efficiency gains.
Its shares today stayed close to their opening mark, down 1.8p at 487.6p, while Direct Line rose 7% or 16.5p to 252.5p in the FTSE 250 index.
The takeover action improved an otherwise dour session in which traders sat on the sidelines ahead of the release of this afternoon’s US unemployment figures.
The FTSE 100 index drifted 3.23 points lower to 8346.15, with housebuilder Berkeley down after reporting a 7.7% fall in pre-tax profits to £275.1 million.
Transaction volumes remain around a third lower than the 2023 financial year although CEO Rob Perrins has seen a slight uptick in activity recent weeks.
He said a meaningful recovery will require a sustained improvement in consumer confidence and stability in the wider macroeconomic environment.
Perrins used the results to unveil a new ten-year strategy, which includes plans for significant growth in Build-to-Rent as Berkeley looks to play its part in addressing the shortfall of London housebuilding.
The shares fell 54p to 4122p are at their lowest point in over a year, having reversed by 16% during 2024.
Some of Berkeley’s rivals fared better in the FTSE 100 after lender Halifax reported a 1.3% increase in November’s average house price. Vistry lifted 10p to 674.5p and Barratt Redrow improved 3.7p to 433.2p.
Among other strong performers, Vodafone continued to make progress after yesterday’s green light for its UK merger with Three as shares added 0.8p to 72.4p. They had been 69.6p on Wednesday afternoon.
Other fallers in the FTSE 100 today included Next, which dropped 210p to 10,020p after UBS trimmed its target price to 10,500p.
Frasers Group also lost another 5.5p to 656.5p, despite two of its non-executive directors spending a total of £70,000 on shares in the aftermath of yesterday’s interim results and profit warning.
In the FTSE 250, the impact of UBS’s Sell recommendation on Serco meant the outsourcing firm featured among the leading mid-cap fallers.
Serco dropped 3% or 4.9p to 150.5p after UBS slashed its price target from 220p to 140p. It has been Buy-rated over the past seven years but warns that earnings growth could stall amidst challenging government spending trends.
FTSE 100 flat as Vodafone strong run continues, Berkeley lower
08:43 , Graeme EvansThe FTSE 100 index is 4.36 points lower at 8345.02, with Berkeley among the fallers after it posted half-year results.
The housebuilder dipped 24p to 4142p, continuing the poor run since August that means the stock is down by around 15% this year.
On the risers board, Vodafone continued to benefit from yesterday’s green light for its UK merger with Three. The shares lifted another 0.8p to 72.4p, which compares with Wednesday’s low point of 69.6p.
Standard Chartered added 9.2p to 979.6p and Sainsbury’s improved 2.4p to 270p. Oil giants BP and Shell rose 3.3p to 382.5p and 11.5p to 2505.5p respectively.
Direct Line shares up 7%, Aviva steady
08:32 , Graeme EvansFTSE 100-listed Aviva shares have held firm at 490p, meaning no dilution to the value of its proposed £3.6 billion cash and stock takeover of Direct Line.
Direct Line rose 7% or 17.8p to 253.8p after Aviva tabled 129.7p per share, plus 0.2867 new Aviva shares per Direct Line share and dividends of up to 5p.
Panmure Liberum said the proposed price is at multiples similar to other transactions seen in the sector.
It added: “We think the revised offer is good for both sets of shareholders – Aviva has not overpaid and DLG shareholders crystalise an attractive return.”
US non-farm payrolls set to rebound
08:07 , Graeme EvansNon-farm payrolls are today’s main event for US markets, given the influence that the monthly figures have on decision making by the US Federal Reserve.
IG Index said traders will be hoping for a "Goldilocks" outcome that would neither rule out an interest rate cut nor raise concerns about economic weakness.
Last month’s figure of 12,000 was the weakest since December 2020, reflecting disruption caused by strike action and Hurricane Milton in Florida.
Deutsche Bank expects a bounce back to 215,000, which would leave the unemployment rate unchanged at 4.1%.
Direct Line-Aviva deal price “too good to pass up”
07:57 , Graeme EvansThe proposed 275p-a-share takeover represents a 73% premium to the Direct Line price before the disclosure of Aviva’s interest.
Hargreaves Lansdown analyst Matt Britzman said: “Direct Line’s board had been holding out, insisting they could make it on their own.
“But even they had to admit that Aviva’s proposal is a golden ticket they’d struggle to match independently. Confidence in their solo strategy aside, this offer was just too good to pass up.
He added: “For Aviva, the price is pushing the limit of good value but snapping up Direct Line could be a strategic jackpot.
“It cements their place as a heavyweight in the UK home and motor insurance markets and brings fresh opportunities to steer Direct Line’s transformation, while squeezing out efficiency gains from their combined scale.”
Berkeley profits fall, unveils 10-year strategy
07:43 , Graeme EvansBerkeley today reported a 7.7% fall in profits to £275.1 million, keeping the builder on track for £525 million in the full year and at least £450 million for 2026.
It reported good underlying demand for its homes, but said that transaction volumes remain around a third lower than the 2023 financial year.
Chief executive Rob Perrins said: “Whilst we have seen a slight uptick in recent weeks, a meaningful recovery will require a sustained improvement in consumer confidence and stability in the wider macroeconomic environment.”
He also announced Berkeley’s new ten-year strategy, which includes plans for significant growth in Build-to-Rent.
Perrins pointed to industry statistics showing that housing starts in London fell to 8450 in the year to June, which compares with the Government's newly identified annual target of 80,000 for the capital.
He said: “Berkeley wants to play its full part in addressing this shortfall and helping Government meet its ambitions and believes that we are close to the point of inflection when both the operating environment and market conditions are supportive of investment.
“In light of this, we are today announcing a new 10-year strategy - Berkeley 2035 - which takes into account both the volatility that persists in the operating environment and emerging opportunities.”
Direct Line flags upside of Aviva combination
07:29 , Graeme EvansThe proposed cash-and-shares takeover will leave Direct Line shareholders owning about 12.5% of Aviva.
In addition to the “attractive” headline value per share of 275p, Direct Line said the combination provided “the opportunity to deliver significant synergies, creating substantial additional value for both sets of shareholders”.
Direct Line said it remained confident in its prospects as a standalone company, but that the offer price is now at a value that it would be minded to recommend to shareholders should a firm bid be tabled.
The takeover package is made up of 129.7p per Direct Line share in cash, 0.2867 new Aviva shares per Direct Line share and dividend payments of up to 5p.
House price growth at two-year high
07:16 , Graeme EvansUK house prices rose for the fifth month in a row in November, up by 1.3% during the month for the biggest increase so far this year.
Mortgage lender Halifax said this pushed the annual growth rate up to 4.8%, its strongest level since November 2022.
The record average house price now stands at £298,083.
Halifax mortgage lender Amanda Bryden said positive employment figures and decreases in interest rates are expected to continue supporting demand.
She added: “This should underpin further house price growth, albeit at a modest pace as borrowing costs remain above the average of a few years ago.”
Direct Line board support 275p-a-share Aviva offer
07:11 , Graeme EvansDirect Line Insurance today said it had reached preliminary agreement with Aviva over a takeover valuing its business at 275p-a-share.
The proposed price compares with the 261p tabled yesterday and Aviva’s initial 250p-a–share, which valued the Churchill and Green Flag firm at £3.3 billion.
The companies issued a joint statement this morning revealing that “they have reached preliminary agreement on the financial terms of a potential acquisition”.
FTSE 100 seen lower, Bitcoin back below $100,000
06:59 , Graeme EvansThe FTSE 100 index is set for another quiet session, with futures trading pointing to a decline of 13 points to 8336.
London’s top flight closed 0.2% higher yesterday, while US markets were slightly lower ahead of today’s non-farm payrolls report.
Brent Crude stands at just above $72 a barrel, while cryptocurrency Bitcoin is back below the $100,000 threshold.
