An investigation into Aviva’s £3.7 billion takeover swoop for insurance rival Direct Line has been launched by Britain’s competition watchdog.
The Competition and Markets Authority (CMA) said it had kicked off an initial probe into the deal to look at whether it would result in a “substantial lessening of competition” in the sector.
The CMA said it will report back with its findings by July 10.
The watchdog will now gather comments on the deal from all interest parties, with a deadline for responses of May 29.
FTSE 100 firm Aviva and its smaller rival Direct Line agreed the deal on December 23 last year, after a £3.3 billion bid was turned down in November.
The combined group would be a significant force in the motor insurance sector, estimated to cover more than a fifth of the total UK market.
Direct Line owns the Churchill and Green Flag brands, as well as its namesake brand as part of a portfolio offering car, pet, home and other insurance policies.
But the scale of the combined group and its share of the market has caught the attention of the CMA.
The takeover has also caused concerns among workers at the two firms after Aviva revealed at the end of last year that around 2,300 jobs would be at risk after the Direct Line deal amid cost-cutting efforts in the wake of the deal.
The takeover will see Aviva pay 129.7 pence in cash and 0.2867 of its own shares for each Direct Line share.
It will also pay up to 5p in dividend payments per share to Direct Line shareholders as part of the deal.
Aviva shareholders will own approximately 87.5% of the new company while Direct Line shareholders will own about 12.5%.
Before the Aviva deal was agreed, Direct Line had already fended off a takeover attempt by Belgian company Ageas earlier in 2024.
Chief executive Adam Winslow had joined Direct Line in March with the goal of turning it around, having been appointed following the ousting of Penny James from the top job.
Direct Line has since announced £100 million of cost cuts and axed 550 jobs.
