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Or the third option Mr Trot. Leave holding as it is and hopefully continue some form of dividend return which has given me back an income so far of £8,750 since 2018.
Yes their value has dropped but my holding is still the same. Why would I consolidate a loss.?
I hold shares in over 200 companies as part of my HL drawdown pension funds. They go up and down in value but overall they still give me an income. These shares form part of my Halifax ISA account along with others so the dividends are tax free.
Not much of a stetch to sweeten it by 40p - but would that make the shareholders fold?
Ageas would need to offer 270p to 300p a share for Direct Line, says Jefferies
(Sharecast News) - Belgium's Ageas would need to make an offer of 270p to 300p a share for UK insurer Direct Line for it to be more likely to be accepted, Jefferies said in a note on Thursday.
Direct Line confirmed on Wednesday that it had rejected a £3.1bn takeover approach from Ageas, saying it "significantly" undervalued the group.
The terms of the "highly conditional, non-binding indicative proposal" comprised 100p in cash and one new Ageas share for every 25.24 Direct Line shares. As at closing on Tuesday, this implied a value of 233p per share.
Jefferies said the 270p to 300p a share range would be more in line with recent M&A valuations in the sector.
"We believe such a deal could be a good strategic fit and would be likely to deliver material synergies, whilst not being problematic from a regulatory point of view," the bank said.
Based on its forecasts, Jefferies said a 233p share price implies a 10.6x 2025F price-to-earnings multiple, which would be a discount to recent UK personal lines insurance deals. It noted that Bain acquired Esure in 2018 at a circa 12x one-year forward P/E multiple, while Sampo bought Hastings at around 14x.
"Thus, a proposal would more likely be accepted if the valuation were greater than 270p, implying a 12x 2025F P/E multiple," it said.
Mulling the prospects of a potential higher offer from Ageas, Jefferies said a 270p to 300p price would imply that the Belgian firm would need to raise a further £0.5bn-£0.9bn in cash.
"This would likely need to be largely funded with new debt, since Ageas guided to having €350m of cash available for investments in 2024 in its results presentation this morning," it said. "We note that Ageas's current financial leverage is 18.3%, so there is sufficient capacity to raise further debt, in our view."
Jefferies rates Direct Line at 'buy' with a 210p price target.
I think 364p is an unrealistic expectation. You can't simply ignore the impact of FY22 and its consequences; namely the sale of the brokered commercial insurance buisness. The sale will have a long term impact on DLG's future profits and potential dividend payments.
Although it's reasonable to assume that DLG's car and home insurance businesses can return to profitability in FY24, if not before, it seems wholly unrealistic to expect the share price to recover above £3 in the short/medium term IMHO. You've also got to factor in that for DLG's share price to recover above £3 then it would probably now have either seize (and retain) a much larger share of the UK car and home insurance market or expand ist services abroad (both are unlikely). Rebuilding its commercial insurance business from scratch would be a long term task and likely to generate losses before it attained the critical mass needed.
You are therefore left with a "bird in the hand or two in the bush" scenario i.e. either accept an offer from Ageas now of (say) £2.50-£2.75 or hold out for £3+ at some point in the future that may never come.
29th February 2024 at 12:01 gmt
Europe Research Brokers Ratings Roundup:
* Direct Line Insurance DLGD.L :
Barclays raises PT to 219p from 188p
* Direct Line Insurance DLGD.L :
Barclays raises to equal weight from
underweight
As a long term dividend reliant holder at 364p a share.
I will not be looking to accept their offer unless I get my break even price which could include some Augeas shares to maintain future incomes in some degree.
There appears to be a concert party breaking cover (today's RNS) and yesterday's Bloomberg article would appear to have been deliberately orchestrated. It would seem more than likely that Ageas will now make a formal offer (since approaching the BoD in late January it would appear that Ageas and its confederates have been building up share positions to ward off any potential counter offer)
It wasn't an offer per se, it was a highly conditional, non-binding indicative proposal i.e. a fishing expedition. Ageas didn't table a formal offer and the BoD weren't obliged to issue an RNS. The fact that this has become public now rather suggests that Ageas might be willing to up the ante and make a formal offer. In the meantime, it suited Ageas not to make a formal offer because that permitted them to buy shares in the market below thier proposal price.
As regards Citigroup, they clearly haven't got a clue. If Ageas is willing to consider paying 233p per share, then that would suggest that DLG must be worth at least 250p as it currently stands (Ageas wouldn't pay over the odds for DLG). Everybody moans about the UK market undervaluing UK companies but it doesn't help when brokers get in on the act and value UK companies based on a dysfunctional market rather than an international peer comparison.
Did they tell family and friends?
I find myself vaguely curious also, someone offering to buy my shares for £2.30 (a 10p profit for me) and I wasn’t made aware of the offer?? Think I’d have bitten their hand off tbh
So the board knew of an offer for ~230p in late Jan but decided not to tell shareholders and subsequently shares were changing hands for 155p yesterday morning. They then had their hand forced when the shares started to randomly spike up 10-13% on seemingly no news. Is this how bids are normally handled?
Europe Research Roundup
Revised Rating: Direct line insurance
Citigroup new rating 29th February 2024
Cuts to neutral from buy.
Cuts target price to £1.62 from £2.25
Revised Rating: Direct line insurance
Citigroup new rating 1 March 2024
Cuts to neutral from buy.
Cuts target price to £1.62 from £2.25
KO?
Trimmed a few to lock in gains at 209 and 203, likely to be an unxexpected pullback so a hedge for now.
Expect Ageas to go hostile with a KO.
"Ageas will need to revise its offer with a higher price or larger cash component or both to convince the board and shareholders.”
If they’ve turned down 233 at 42% mark up , which is the usual take over initial % offer, I would imagine we are looking at an offer of 52% being accepted…
If DLG truly believe they can turn this around within 6-12 months they should not entertain anything less than £3
If we are bought out at 250p I would be ok with that , but would feel disgruntled a bit as I think divis will resume to norm in the years to come
I will take 250p for one dlg share
Some of my buys were 220p, some were 140p and 160p. Shame I was tempted to buy £600 top up the other day. I’m only up 10% at 200p
It's no wonder that DLG has received an approach, and now specifically. Personal lines insurance premiums have increased significantly which, even allowing for claims inflation, will lead to it being much more profitable. But it will remain a competitive market so, in time, those premiums will adjust to something more normal. But in the meantime, insurers can make a bit of hay.
Now DLG is a special case owing to its 2022 fk up. It's share price (as we have noticed) is on the floor, so it's an easy target for an offer at a share price premium. However, I think we know that 2022 is more or less behind us, the business has been reset (premiums), the balance sheet has been largely repared (thanks to shareholders not receiving about 35ppps in dividends) and the future is looking better. FY23 will be OK. FY24 will be very good (and that is what Aegeas wants to buy before we know what it is).
Now I don't think DLG should be let go for anyting like Aegeas' offer. It might come back with a better one, or another bidder may enter the frame. If it comes to nought, it will also increase the pressure on the new CEO about the forward dividend (see my post of 9.30am that became irrelevant with the day's news!).
Guitarsolo
You pays your money and you take your chances.
The dividend will be re-started at some point, if not FY23 then more than likely FY24 (it's not a case of but when), albeit that the annual dividend will probably be less than previously.
DLG might not meet their criteria for FY23 due to the unwinding of their pricing miscalculations in FY22. They only started to take the necessary actions to rectify their mispricing in H2 FY22 and their premiums have been rising since but it has had to be a gradual process. Premiums generally, across the whole market, are now more than double what they were on average just 12 months ago but much of that benefit (hopefully profits) will probably not be recognised until FY24 (due to how the premiums are accounted over the term of the contract).
As a result, I suspect that DLG may not start to see the full benefit until FY24. Because of the effects of fiscal drag, their FY23 results will still probably underwhelm (due to many of their FY22 contracts closing out in FY23) but they should have pretty good visibility for FY24 and that might give them the confidence to re-start the dividend (they have the reserves even if they don't have the current year profits).
Churchill and Direct Line are household names in the car and home insurance business. There is therefore no doubt in my mind that DLG has the means to deliver but it will take time to put FY22 firmly behind in the rear-view mirror.
We don't care how opportunistic the bid was, why are companies like DLG keeping bids hidden? For over a month!
How many others are hiding approaches and enjoying their SPs remain at trashed levels?
Definitely had egg on their face today, couldn't have timed his usual tripe any better today!