Aviva has £3.3 billion takeover bid rejected by Direct Line

Aviva, the UK’s largest insurer based in Norwich, put forward a cash-and-shares bid – worth 250p a share – to buy Direct Line last week.

But Direct Line swiftly rejected the offer, which it said “substantially undervalued” the company.

It is the second time Direct Line has rebuffed a suiter this year, following its dismissal of a £3.1bn approach from Belgian firm Ageas in February.

The FTSE 250-listed firm Direct Line saw its stock surge more than 39pc in morning trading on Thursday following Aviva’s announcement of the bid after the market closed on Wednesday.

However, experts say Aviva, which employs thousands of people in Norwich, could come back with a higher potential offer.

Aviva's Norwich headquarters (Image: Newsquest) Direct Line said: “The board considered the proposal to not reflect the standalone value that can be delivered by the company, and hence considered the possible offer highly opportunistic in nature.”

On confirming the approach, Aviva said: “The acquisition would expand Aviva’s presence in the attractive UK personal lines market, building on its existing strength, and creating a more efficient platform from which to serve existing and new customers.

“In addition, the acquisition would allow Direct Line customers to benefit from Aviva’s breadth, scale and financial strength.”

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Direct Line is in the middle of a turnaround after last year’s soaring cost of claims.

Former boss Penny James stepped down last year in the wake of a profit warning and move to scrap the shareholder dividend.

The firm’s new boss Adam Winslow has since been spearheading a revamp plan, which has included cost-cutting and increasing the price of its insurance.

It has come at a cost, however, with the group having to shed hundreds of thousands of own-brand motor policyholders and revealing plans earlier this year to axe around 550 jobs to ramp up savings.