Direct Line’s shares surged as investor’s hoped the rejection might pave the way for a second takeover bid from the U.K.’s largest insurance company

Aviva Plc is exploring a potential takeover of Direct Line Insurance Group Plc, people with knowledge of the matter said.

Goldman Sachs Group Inc. has switched sides to advise Aviva Plc on its £3.3 billion ($4.2 billion) takeover bid for Direct Line Insurance Group Plc, only eight months after helping the target successfully defend against another suitor.

Direct Line’s new boss, Adam Winslow, is a former executive at Aviva and the two insurers have large shareholders in common such as Schroders and Redwheel.

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.

Aviva has contacted shareholders in Direct Line Group (DLG) to convince them to reconsider its takeover offer. That was according to the Financial Times (FT), which said that the move “could pave the way for a hostile takeover bid for its smaller rival”.

(Reuters) -Shares in UK's Direct Line Insurance soared over 36% in early trade on Thursday after it rejected a 3.28 billion pound ($4.16 billion) takeover offer from bigger rival Aviva, saying it "substantially undervalued" the company.