Will DLG engage with Aviva on their proposed acquisition offer? And how do the numbers stack up for Aviva? DLG have rejected Aviva''s bid (58% premium) On 27th November, press reports emerged that Aviva had made a proposal to buy DLG. Aviva subsequently disclosed that it had made an offer to DLG on 19th November at a price equivalent to GBP2.50 / share, representing a 58% premium. This offer had been rejected by DLG''s Board on the 26th. Aviva states that DLG''s board has declined to engage further with Aviva. Where next from here? As it stands, the bid has been rejected, although Aviva''s press release on the 27th November indicates that they believe the offer still offers a good deal to DLG shareholders. We see several potential routes forward - including a revisiting of Aviva''s offer, counter-offers from elsewhere, or DLG simply continuing as a stand-alone business. If Aviva is successful, we expect there is considerable overlap in the personal lines businesses, which should offer an opportunity for synergies. At the same time, we think the combined market shares would be c.20% in each of personal motor and home, limiting anti-trust constraints. Merger model: the transaction as proposed appears marginally accretive for Aviva We publish an initial merger model (available to download here) to assess the economics of Aviva''s proposed transaction. On our assumptions, the EPS accretion to Aviva could be in the high single digits - albeit that is largely a reflection of deploying excess capital and/or increasing leverage. On our preferred ''cash'' view, the accretion is in the low-to-mid single digits.