Aviva has agreed a deal to buy rival company Direct Line for £3.7 billion before the Christmas Day deadline.
The insurance company announced the deal with its smaller competitor weeks after a £3.3bn bid turned down in November.
A deal between the two companies would make them a force in motor insurance, which is estimated to cover more than 20% of the UK market.
Aviva chief executive Amanda Blanc hailed the deal as “great news”.
“Aviva and Direct Line share a deep commitment to excellence in customer service and this will remain a top priority following the acquisition,” she added.
“The financial strength and size of the combined group means customers will benefit from competitive pricing, an improved claims experience and even better service. »
The announcement came days after controversial billionaire Elon Musk denounced Ms Blanc’s alleged approach of approving senior appointments of white men in order to improve diversity.
Over the next few days, the company’s stock price fell slightly – although it was already falling before Mr. Musk’s remarks.
Aviva will pay 129.7 pence in cash and 0.2867 of its own shares for each Direct Line share as part of the buyback.
It will also pay dividends of up to 5p per share to Direct Line shareholders, with Aviva shareholders owning 87.5% of the new company and Direct Line shareholders the remainder.
The merger is expected to be finalized by the middle of next year, following a shareholder vote in March.
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Direct Line has struggled in recent years and last month announced it would cut 550 jobs and make cuts worth £100m.
But chief executive Adam Winslow said the company was “a great business, home to many popular insurance brands, and this year we have made rapid progress in our turnaround strategy.”
“The combination of Direct Line and Aviva offers the opportunity to create a strengthened and expanded business,” he added.
“In a highly competitive UK general insurance market, the merged entity will be very well placed to meet the expectations of its customers.”