Aviva's $4.9 billion Direct Line deal faces UK competition probe

LONDON, May 14 (Reuters) - Aviva's bid to become Britain's largest home and motor insurer via a 3.7 billion pound ($4.92 billion) takeover of smaller rival Direct Line suffered a potential snag on Wednesday, after Britain's antitrust watchdog said it would review the deal.

The Competition and Markets Authority (CMA) said it was considering whether the transaction could result in a substantial lessening of competition and has invited feedback from interested parties by May 29.

Aviva shares, which have risen 22% this year so far and hit a fresh 12-month high on May 12, were broadly unchanged in early trading on Wednesday.

Aviva and Direct Line struck the landmark agreement in December to create one of London's largest listed insurers, rivalling Legal & General and Asia-focused Prudential in terms of market value.

The deal reflects Aviva's aims to grow in less capital intensive businesses and to consolidate in core markets of Britain, Canada and Ireland.

The combined company, which would represent CEO Amanda Blanc's most ambitious corporate transaction to date, would have a more than 20% share in both home and motor insurance in the UK, JP Morgan analysts said at the time the deal was unveiled, although they did not expect any competition concerns.

Aviva, which is due to report first quarter figures on Thursday, declined to comment.

In February it said it had beaten annual profit expectations on double-digit growth in its general insurance premiums in 2024, and the acquisition of Direct Line was on track to complete around the middle of 2025.

The CMA has set a deadline of July 10 to make an initial phase 1 decision on the deal, it added. ($1 = 0.7519 pounds) (Reporting by Yadarisa Shabong in Bengaluru and Sinead Cruise in London; Editing by Mrigank Dhaniwala, Iain Withers, Elaine Hardcastle)