Insurance company Aviva has contacted investors in bid target Direct Line, which could pave the way for a hostile takeover of the smaller rival, the Financial Times reported on Thursday.
Aviva said late on Wednesday it had made a 250p cash and stock offer for Direct Line on November 19.
This offer, which represented a premium of almost 60% over Direct Line's closing price on November 18, was rejected. Direct Line said the proposal was “highly opportunistic”.
On Thursday, Direct Line shares jumped 41.4% to 224.4 pence at 1801 GMT, their highest level since March 13 this year.
At the same time, Aviva shares fell around 2% to 479.5p, putting itself among the top losers on the FTSE 100 index.
Had the transaction been completed, Direct Line shareholders would have received 112.5p in cash and 0.282 new Aviva shares for each Direct Line share held.
In March, Direct Line rejected a takeover offer from Belgian rival Ageas, which was 4.6% lower than the offer made by Aviva on Wednesday.
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