INGA ING Groep NV

Dutch financial services company Delta Lloyd NV has rejected a €2.4 billion ($2.7 billion) takeover bid from local rival NN Group NV.

Delta Lloyd said Friday that the €5.30 a share proposal announced Wednesday "substantially undervalues Delta Lloyd, its prospects and its strategic opportunities."

It said the offer failed to reflect the savings and other benefits Delta Lloyd shareholders could gain from possible combinations with other companies.

"Our capital position is now solid with opportunity to improve further capital generation and dividends," said Hans van der Noordaa, chairman of Delta Lloyd's executive board

"In light of this, we cannot accept this proposal," he said.

Delta Lloyd's shares soared 30% in Amsterdam after NN's announcement Wednesday.

The approach comes as the European insurance sector is experiencing a period of upheaval, struggling with record-low interest rates and new European Union capital requirements, known as Solvency II, which came into force this year.

The Dutch central bank, which regulates the insurance market in the Netherlands, has long argued that cost-cutting and mergers are necessary, especially in the shrinking life-insurance sector.

"It was a matter of time that consolidation would start," said ING analyst Albert Ploegh on Wednesday. With its strong capital position NN is a logical candidate to lead a consolidation wave, he said.

Delta Lloyd, a former unit of U.K. insurer Aviva PLC, has been the subject of takeover speculation for some time. Its shares have dropped by around 70% since the start of 2015 as it battled to strengthen its capital position in light of the new insurance rules.

Earlier this year, it raised €650 million through a rights issue despite opposition from some major shareholders.

NN Group was formerly part of Dutch bank ING Groep NV, but split from the company in 2014 and was floated on the Amsterdam stock exchange in the same year.

Write to Rory Gallivan at rory.gallivan@wsj.com and Maarten van Tartwijk at maarten.vantartwijk@wsj.com

(END) Dow Jones Newswires

October 07, 2016 02:55 ET (06:55 GMT)

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