By Eva Mathews and Carolyn Cohn
(Reuters) - Britain's Direct Line (LON:DLGD) said on Wednesday it had rejected a revised 3.17 billion pound ($4.06 billion) takeover bid from Belgian rival Ageas, repeating that it "significantly undervalued" the home and motor insurer.
Direct Line, a household name in insurance in Britain, rejected a previous offer from Ageas last month, which valued it at 3.1 billion pounds.
"The board is confident in Direct Line Group's standalone prospects," the insurer said in a statement, describing Ageas' sweetened offer as "highly opportunistic".
Direct Line has been through a rocky period since it scrapped its dividend and its former chief executive exited the company in January 2023.
It is due to report full-year results next week, after the appointment of Adam Winslow as CEO earlier this month.
Direct Line's shares have risen sharply since it said on Feb. 28 it had rejected Ageas' first proposal. Its shares were trading 5.8% lower at 212.8 pence at 1221 GMT.
Direct Line said it had received the fresh Ageas proposal on March 9, adding that it offered 120 pence in cash and a new Ageas share for every 28.41107 Direct Line share held.
This was above the earlier bid of 100 pence and an Ageas share for every 25.24047 Direct Line share.
Direct Line said the offer valued the company at 237 pence per share, around 3% above the previous Ageas offer, based on its March 8 closing price.
"We look forward to engaging with the Direct Line Board of Directors on the terms of our improved possible offer," Ageas said in a separate statement, adding that it would continue to engage ahead of a March 27 deadline under UK takeover rules.
Jefferies analysts said that there was "much more needed" to make the deal attractive, though they reiterated their buy rating on Direct Line.
Ageas shares were up 0.43%.
KBW analysts said that Ageas had been "disciplined and rational" in its approach with this second offer, adding that "it could also signal that not many other potential bidders are ready to commit" to Direct Line.
Reuters reported on March 7 that Ageas was pursuing a further offer and that both insurers had hired extra advisers.