The competitive group life market for super funds is set to become even more competitive this year following Dai-Ichi Life Insurance’s friendly takeover bid for Tower Australia.
Tower, which last year scored some big wins in group life and prompted whispered criticism on pricing from competitors, will now have more fire power for expansion.
The December 28 announcement from Dai-Ichi that it would offer $4 cash for each share that it did not already own in Tower – a 46 per cent premium on the previous month’s average trade – was followed by reports that the Japanese firm would use the new subsidiary as a beachhead for further expansion in Asia Pacific.
Negotiations between the two firms are said to have commenced only in early December after Dai-Ichi indicated it wanted to move to full ownership, having acquired its initial 29 per cent in 2009. The independent Tower directors, including chairman Rob Thomas, have recommend shareholders accept. An independent expert will now assess whether it is fair and reasonable.
In the overall life insurance market, Tower is the fifth largest in Australia.
The current board and management, which are expected to be largely retained, have concentrated on the firm’s core life insurance business rather than diversification in other areas of wealth management or advice.
It will be interesting to see whether Dai-Ichi, if it continues to be as expansionist as expected, retains this philosophy or looks to spread Tower’s management capabilities, under chief executive Jim Minto, wider afield.
Japanese interest in Australia’s funds management market was expressed late last year by Nikko Asset Management, which took Tyndall Investment Management off Suncorp’s hands.
The takeover will by via a scheme of arrangement, subject to regulatory approvals. A Tower shareholders meeting is expected in the second quarter.