Australia and New Zealand based insurer Suncorp Group has made a counter-offer to acquire Tower Insurance of New Zealand, seeking to beat Prem Watsa’s Fairfax to the deal.
Now Suncorp has announced that its subsidiary Vero Insurance New Zealand Limited acquired 11.14% of the ordinary shares in Tower Limited in New Zealand, and has a position in the market to take up to 19.9% of the shares in Tower.
Vero also made a non-binding proposal to acquire the remaining 88.86% of ordinary shares at a price of NZ$1.30 per share, which is above the price offered by Fairfax.
Suncorp New Zealand CEO Paul Smeaton explained that acquiring Tower “provided an opportunity to strengthen Suncorp New Zealand’s strategic position in the highly competitive New Zealand insurance market.”
“The proposed acquisition supports our vision to be the number one choice for New Zealanders and our strategy to connect customers to products, services and experiences that enhance and protect their financial wellbeing,” he explained.
“The proposed acquisition would consolidate Suncorp’s position in the New Zealand general insurance market, creating a business with gross written premiums of NZ$1.6 billion. The combined business would generate significant shareholder value through cost efficiencies, as well as reinsurance and technology synergies,” he continued.
Tower Chairman Michael Stiassny responded, saying that the Board’s advice to shareholders was not to sell their shares until the Board had fully reviewed the offer and made a further announcement.
“The Board’s primary focus remains to optimise value for our shareholders. In order to do so, we need to review and evaluate all options. We will update the market on any further material developments as the circumstances require,” he explained.
Tower also confirmed the acquisition offer and said it is “considering the Suncorp proposal, and working through obligations with respect to the Scheme Implementation Agreement with Fairfax Financial.”
The offer from Suncorp certainly complicates matters for Tower, in having to decide who to go with.
No doubt an integration with Suncorp would likely be simpler, given the Vero operations already in New Zealand. But the acquisition by Fairfax could be deemed more attractive to shareholders, given the fact it could position the company as part of a globally diversified insurance, reinsurance and financial services group.
