British insurer Aviva could cut up to 2,300 jobs as it takes over smaller rival Direct Line in a 3.7 billion pound ($4.65 billion) cash-and-stock deal, the companies said on Monday [Dec. 23], creating the UK’s largest home and motor insurer.

The deal, which was first announced earlier this month, will see Direct Line shareholders receive 0.2867 new Aviva shares, 129.7 pence in cash and up to 5 pence in the form of a dividend, Aviva said.

The takeover represents Aviva CEO Amanda Blanc’s biggest acquisition to date, as she tries to expand in the company’s core markets of Britain, Canada and Ireland after selling a series of overseas assets to simplify the business.

The combined company will shed between 5-7% of its total workforce as it eliminates overlapping roles, putting up to 2,300 jobs at risk, with the cuts spread over three years, the companies said.

Aviva had just over 23,000 employees at the end of 2023 while Direct line had just over 10,000, according to the companies’ annual reports.

Analysts said the terms of the deal were in line with expectations, and Aviva shares rose 0.5% on Monday [Dec. 23], following the announcement of the agreement.

“Christmas has come early for Direct Line investors,” Matt Britzman, senior equity analyst at Hargreaves Lansdown said in a note.

Aviva and Direct Line reached a preliminary agreement in early December. Aviva had until Christmas Day to make a formal offer or walk away under UK takeover rules.

Aviva aims to save 125 million pounds annually in pre-tax costs within three years after completion.

Realizing the cost savings from the deal will result in one-off integration costs of approximately 250 million pounds, the companies said.

The deal will also allow Aviva to increase its dividend after completion, by a “mid single digit percentage,” it said, but the company will no longer launch a share buyback next year while it completes the transaction.

Direct Line, under CEO Adam Winslow who joined the company from Aviva in March, has made efforts to energize a business hurt by an underperforming motor insurance arm.

The company missed expectations for half-year operating profit in September.

It has implemented aggressive price hikes to mitigate the rising costs of claims and announced plans in November to cut 550 roles, or about 5% of its global workforce.

($1 = 0.7957 pounds)

(Reporting by Chandini Monnappa and Aby Jose Koilparambil in Bengaluru and Lawrence White in London; editing by Varun H K, Mrigank Dhaniwala, Kirsten Donovan and Tomasz Janowski)