Tower board backs increased Vero takeover
Tower's board is backing the increased takeover bid from Suncorp Group-owned Vero Insurance New Zealand, provided the $236 million offer wins approval from local regulators.
The Auckland-based insurer has signed a scheme implementation agreement with ASX-listed Suncorp, where local subsidiary Vero will pay $1.40 a share to buy the NZX-listed general insurer. The deal, which trumped an earlier merger proposal from Canada's Fairfax Financial Holdings at $1.17 a share, valuing Tower at $197.3 million, is subject to the merger getting antitrust approval from the Commerce Commission. Tower shares jumped 14 percent to $1.32 after the announcement, which allowed the stock to come out of a trading halt.
That regulator decision was expected to be wrapped up by the end of the week, but Tower chairman Michael Stiassny today said the deadline is likely to be pushed out into July.
"After careful consideration, taking into account relevant factors and advice from Goldman Sachs and Chapman Tripp, Tower considers the Vero SIA is a superior proposal to the existing Fairfax scheme," Stiassny said in a statement. "Fairfax has advised that it will not increase its offer price."
Tower's board held back from making a recommendation on the rival bids when Vero initially swooped in with an offer of $1.30 a share, saying it would work to get the best deal possible for shareholders.
The Vero takeover will also need shareholder approval at a special meeting likely to be held in September, with at least 75 percent of votes cast in favour of the deal, and that those votes represent more than 50 percent of the shares on issue.
The transaction also needs Reserve Bank and Pacific Island regulatory approvals.
In a written statement, Vero said it will work closely with the Tower board to "bring the transactions to fruition, providing the best result for both company's shareholders and customers."
The Scheme of Arrangement remains subject to a number of conditions, including approval by Tower shareholders and court approval. The transaction is also subject to necessary regulatory approvals, including approval from the New Zealand Commerce Commission and the Reserve Bank of New Zealand.
The commission's statement of preliminary issues in March said the regulator would initially investigate whether the deal would substantially reduce competition in personal and commercial insurance markets and whether it would boost Suncorp's market power. The Australian insurer's New Zealand brands include general insurer Vero and life insurer Asteron Life, and the AA Insurance and AA Life joint ventures withe Automobile Association.
Suncorp's ASX-listed shares slipped 0.7 percent to A$14.61.