(Reuters) -Shares in UK’s Direct Line Insurance soared over 36% in early trade on Thursday after it rejected a 3.28 billion pound ($4.16 billion) takeover offer from bigger rival Aviva, saying it “substantially undervalued” the company.
The insurer, which made the announcement after market hours on Wednesday, topped gains on the FTSE 250 mid-cap index, while Aviva’s shares fell about 3% to be the top percentage loser on the blue-chip FTSE 100 index.
Shares in Direct Line, which have fallen about 13% so far this year, surged as much as 39% to a more than eight-month high of 220 pence in early trade.
The stock is still trading below the proposed offer price of 250 pence-a-stock from Aviva.
According to British takeover rules, Aviva has until Dec. 25 to make a firm offer or walk away.
Jefferies analysts said that they believed that a higher bid might be forthcoming if Direct Line’s board considers engaging with Aviva.
(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Abinaya Vijayaraghavan and Sonia Cheema)
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