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Banks, lawyers and advisers are set to share a £120m payday from Aviva’s £3.6bn takeover of Direct Line.
City businesses including Robey Warshaw, a small Mayfair firm that counts George Osborne as one of its partners, are among those in line to share £49.5m for work advising Direct Line, documents published on Monday show. RBC Capital Markets and Morgan Stanley have also been working on the Direct Line side.
Meanwhile, Aviva has spent £70.2m on advisers to the deal. It is working with investment banks Goldman Sachs and Citi, among others.
Aviva’s acquisition, which was agreed in December, will see it take over Direct Line for £3.6bn in cash and shares. The deal will strengthen Aviva’s leading position in the UK’s insurance market, broadening its coverage into new areas such as pets, breakdown coverage and small business insurance.
The FTSE 100 giant said the takeover would also help it to improve payouts to investors. Aviva believes it can save annual sums worth £125m by cutting costs from the combined group. As part of this push, more than 2,000 jobs are expected to be lost from the newly merged business as overlapping positions are cut.
A timetable published on Monday shows Direct Line shareholders will be asked to vote on the proposed merger on March 10, with the two companies hoping to complete the deal by the middle of this year.
Direct Line’s board has unanimously recommended that investors back the deal, which is priced at 275p a share and is a 73pc premium to the company’s pre-offer stock price. Direct Line initially rejected Aviva’s approach before accepting a sweetened offer.
Adam Winslow, a former Aviva executive who now heads Direct Line, was leading a turnaround at the insurer when it was approached by its bigger rival. Despite early progress, Direct Line’s directors said the market continued to undervalue the business.
In a letter to shareholders published on Monday, Danuta Gray, the Direct Line chairman, said the deal offered “an attractive valuation of Direct Line today when taking into account the risks inherent in a multi-year turnaround and the prevailing market backdrop.”
Direct Line, which is headquartered in Bromley, south-east London, was first formed in 1985 as the insurance arm of the Royal Bank of Scotland. The insurer was the first company in Britain to circumvent brokers by selling policies directly to customers.
Aviva traces its origins back to a mutual society called Hand in Hand that was formed in 1696, in the aftermath of the Great Fire of London. Today, it is Britain’s largest insurer, having grown through a series of mergers and acquisitions.