Insurance company Aviva has contacted investors in bid target Direct Line, a move that could pave the way for a hostile takeover of the smaller rival, the Financial Times reported on Thursday. Aviva said late on Wednesday it made a 250-pence cash and share offer for Direct Line on Nov.

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.

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%.

(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.

The insurance giant, led by Amanda Blanc (pictured), revealed last night that it tabled an offer for its smaller competitor worth 250p a share.

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”.

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 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.

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

Direct Line Insurance Group Plc shares surged as much as 39% after the insurer rejected a £3.3 billion ($4.2 billion) takeover bid from Aviva Plc, the second suitor it’s rebuffed this year.