UK insurer Aviva to shed as much as 2,300 jobs in $4.65 billion Direct Line deal

By Chandini Monnappa and Lawrence White

LONDON (Reuters) -British insurer Aviva (LON:AV) might minimize as much as 2,300 jobs because it takes over smaller rival Direct Line (LON:DLGD) in a 3.7 billion pound ($4.65 billion) cash-and-stock deal, the businesses stated on Monday, creating the UK’s largest house and motor insurer.

The deal, which was first introduced earlier this month, will see Direct Line shareholders obtain 0.2867 new Aviva shares, 129.7 pence in money and as much as 5 pence within the type of a dividend, Aviva stated.

The takeover represents Aviva CEO Amanda Blanc’s greatest acquisition to this point, as she tries to broaden within the firm’s core markets of Britain, Canada and Eire after promoting a sequence of abroad belongings to simplify the enterprise.

The mixed firm will shed between 5-7% of its whole workforce because it eliminates overlapping roles, placing as much as 2,300 jobs in danger, with the cuts unfold over three years, the businesses stated.

Aviva had simply over 23,000 workers on the finish of 2023 whereas Direct line had simply over 10,000, in keeping with the businesses’ annual reviews.

Analysts stated the phrases of the deal have been according to expectations, and Aviva shares rose 0.5% on Monday following the announcement of the settlement.

“Christmas has come early for Direct Line buyers,” Matt Britzman, senior fairness analyst at Hargreaves (LON:HRGV) Lansdown stated in a notice.

Aviva and Direct Line reached a preliminary settlement in early December. Aviva had till Christmas Day to make a proper provide or stroll away below UK takeover guidelines.

Aviva goals to avoid wasting 125 million kilos yearly in pre-tax prices inside three years after completion.

Realising the price financial savings from the deal will lead to one-off integration prices of roughly 250 million kilos, the businesses stated.

The deal will even enable Aviva to extend its dividend after completion, by a “mid single digit share”, it stated, however the firm will not launch a share buyback subsequent 12 months whereas it completes the transaction.

Direct Line, below CEO Adam Winslow who joined the corporate from Aviva in March, has made efforts to energise a enterprise harm by an underperforming motor insurance coverage arm.

The corporate missed expectations for half-year working revenue in September.

It has applied aggressive worth hikes to mitigate the rising prices of claims and introduced plans in November to chop 550 roles, or about 5% of its international workforce.

($1 = 0.7957 kilos)