Direct Line Insurance Group Plc rejected a £3.3 billion ($4.2 billion) takeover bid from Aviva Plc, rebuffing the second suitor this year.

By Raechel Thankam Job, Carolyn Cohn and Anousha Sakoui LONDON (Reuters) -Direct Line shares soared 41% on Thursday after it rejected a 3.28 billion pound ($4.15 billion) takeover bid from rival Aviva,

Direct Line topped gains on the FTSE 250 mid-cap index, while Aviva's shares fell around 3 per cent to be the top percentage loser on the blue-chip FTSE 100 index.

Aviva has contacted shareholders in Direct Line in a move that could pave the way for a hostile takeover bid for its smaller rival. The FTSE 100 insurer began to approach its target’s shareholders on Thursday,

Aviva has launched a £3.4bn takeover bid for rival Direct Line in a tie-up that would create one of Britain’s largest car insurers.

Shares in Direct Line jumped by more than 40% today on the news it has rejected a £3.25bn ($4.12bn) potential takeover bid from Aviva. As at 14:00 London time, Aviva’s share price had fallen by nearly 3%.

The stock soared by 41% as traders reacted to the disclosure that Direct Line, led by boss Adam Winslow, (pictured) had rejected an approach.

British insurer Direct Line Insurance has rejected a takeover offer of £3.28 billion from bigger rival Aviva, saying it "substantially undervalued" the company.

Direct Line, the motors-to-homes insurance group, has rejected a £3.3 billion takeover proposal from Aviva. The cash-and-shares proposal valued Direct Line at 250p a share, comprising 112.5p per share in cash and 0.282 new Aviva shares.