Suncorp withdraws Tower takeover appeal

Tuesday, 7 November 2017

Vero, which is owned by Australian insurer Suncorp, has ended its appeal against the Commerce Commission's decision that it could not buy Tower.

Giant Australian insurer Suncorp has cancelled its plans to take over Tower.

Suncorp had hoped to add Tower to its portfolio of New Zealand 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Suncorp has now withdrawn its legal appeal against the commission's decision.

* Commerce Commission declines Vero Insurance takeover of Tower

* Tower board working with Suncorp on its bid to buy**

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.'

Tower chairman Michael Stiassny said Tower had sent the notice of termination, but that it had been open to renegotiating a new agreement.

Suncorp responded by pulling its appeal. Tower had not yet formally withdrawn from the appeal, Stiassny said.

Suncorp spokesman Tony Reid said the insurer had weighed up its chances of success in the appeal before deciding to abandon it. Though it felt it had a strong case, the legal bar to overturn the commission's decision was very high.

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.