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.

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.

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’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

(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.