New Zealand general insurer Tower has signed an agreement with Vero, a local insurance arm of Australian financial services group Suncorp, for Vero to take over Tower.
The move followed Vero raising its takeover offer to NZ$1.40 (US$1.02) per share, an increase of 10 NZ cents over its previous offer. The new price values Tower at about NZ$236 million.
The revised offer exceeds a bid by Canadian company Fairfax Financial Holdings, which offered NZ$1.17 a share.
Tower Chairman Mr Michael Stiassny said that the company's board had originally backed the Canadian bid. However, Fairfax had said it would not increase its offer, thus making Suncorp the best on the table.
"The Board has been adamant that all shareholders benefit equally from any sale. We are pleased that Suncorp has seen fit to increase their non-binding indicative offer from $1.30 per share to a firm offer that meets the price previously paid to a minority of institutional investors," he said.
Suncorp already has a 19.99% stake in Tower, and it will need Commerce Commission clearance, because the Australian company is a big player in the New Zealand market with the Vero, AA Insurance and Asteron brands.
However, the planned takeover is being done by a scheme of arrangement, meaning Suncorp will need at least 75% of shareholder votes cast in favour at a special meeting, and those votes must represent more than 50% of the total voting rights of the company.
The transaction also needs Reserve Bank of New Zealand and Pacific Island regulatory approvals.
Tower reported a loss in the year ended 30 September 2016 of NZ$21.5 million, dragged down by the legacy of the 2010-11 Canterbury earthquakes and impairment of technology assets.
For the first half year ended 31 March 2017, the insurer posted an after-tax loss of NZ$8.2 million due to adjustments to Canterbury provisions, Kaikoura earthquake and large loss events.