Tower takeover cancelled
07 Nov 2017
Suncorp has cancelled its plans to take over Tower. It had hoped to add Tower to its portfolio of NZ businesses, which includes Vero, Asteron Life, and a majority stake in AA Insurance.
But it's plan was scuppered in July, when the Commerce Commission vetoed the takeover because it threatened to substantially lessen competition, potentially leading to higher house, car and contents insurance premiums for households.
Suncorp has now withdrawn its legal appeal against the commission's decision.
In an announcement to the Australian ASX sharemarket Suncorp said its decision was a result of Tower ending the two companies' "agreement" to pursue the takeover.
"Vero Insurance New Zealand Limited (Vero)... today announced it had received notice of termination from Tower Limited of the Scheme Implementation Agreement," Suncorp announced.
"As a result, Suncorp will no longer be proceeding with its appeal of the New Zealand Commerce Commission's decision to decline its application to acquire Tower."
Tower's own announcement to the New Zealand NZX stock exchange appeared to lay blame for the decision with Suncorp.
"Tower Limited has been advised by Vero Insurance New Zealand Limited... that it will no longer be appealing the Commerce Commission's decision to decline its application to acquire 100 per cent of Tower," Tower said.
It continued: "The Tower board of directors is continuing to develop plans to raise further capital and will update the market with its full year results on 14 November 2017."
Higher insurance premiums and less cover was a "real risk" if a merger between Tower and Vero Insurance had been allowed, the Commerce Commission ruled in July.
Had the deal been allowed, it would have brought together the country's second and third largest general insurers and given Vero 30 per cent of the total insurance market.
The largest insurer is IAG, which owns the AMI, State and NZI brands.
Suncorp offered to buy Tower for $219.3 million, or $1.30 a share in February, increasing the offer to $1.40 a share in June.
It also took a 20 per cent stake in Tower.
The bid trumped a previous $1.17 a share offer for Tower from Canadian Fairfax Financial Holdings.
Suncorp's decision to end its tilt at Tower could open the way for Fairfax Financial Holdings to renew its interest.