• Aviva’s proposed £3.7bn takeover of Direct Line is under investigation by the UK’s Competition and Markets Authority (CMA) over concerns it could significantly reduce competition in the insurance sector.
• The CMA is set to release its findings in July, with feedback from interested parties due by 29 May.

The UK’s Competition and Markets Authority (CMA) has initiated a probe into Aviva’s proposed £3.7bn acquisition of Direct Line, a move that could potentially disrupt the planned merger between the two insurance giants. The investigation seeks to determine whether the merger would significantly reduce competition in the insurance sector.

Competition Concerns in the Car Insurance Sector

Aviva and Direct Line agreed to the merger in December last year. However, the CMA has expressed concerns that the deal could lead to a substantial lessening of competition in the UK insurance market, particularly in the car insurance sector, where the combined entity would hold a considerable market share. The CMA is expected to release its findings in July.

Market Impact and Share Distribution

If the merger proceeds, the new company would become a formidable competitor to other major insurers like Legal & General and Prudential. Aviva shareholders would control approximately 87.5% of the combined entity, while Direct Line shareholders would own the remaining 12.5%. The merged company would command over 20% of the home and motor insurance market in the UK.

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Direct Line’s Portfolio and Market Influence

Direct Line’s extensive portfolio includes well-known brands such as Churchill and Green Flag, along with a diverse range of insurance products including car, pet, and home insurance policies. Integrating these brands under Aviva’s umbrella could significantly alter the competitive landscape in the insurance industry.

Expert Opinions and CMA’s Stance

Despite prior assessments from experts at JP Morgan, who anticipated minimal regulatory concerns, the CMA has flagged potential issues. According to the regulator, the creation of a single dominant firm may adversely impact competition within the UK insurance market.

Feedback and Next Steps

The CMA has invited feedback from interested parties, including individuals and businesses potentially affected by the merger. Stakeholders have until 29 May to provide input, as the regulatory body continues its examination of the deal’s implications for market competition.