Tower Australia’s independent directors support Dai-ichi takeover at 47% premium
Dec. 29 (BusinessDesk) – Tower Australia Group Ltd.’s independent directors have unanimously endorsed a A$1.19 billion takeover offer from Japan’s Dai-ichi Life Insurance that would hand other shareholders a 47% premium from its last trading price. Shares of the target soared to near the offer price on the ASX today.
Dai-ichi currently owns 29% of Tower, which was spun off from Tower New Zealand by then owner Guinness Peat Group. Dai-ichi’s A$4-a-share offer for the rest of the company is the highest seen since the split, and is the second time the Japanese insurer has shown willing to pay a substantial premium for Tower Australia shares.
Tower Australia rose A$1.14 to A$3.86 on the ASX today. The shares are rated ‘outperform’ based on the consensus of three recommendations compiled by Reuters.
Japan’s second-biggest life insurer acquired its initial holding in Tower Australia in 2008 from Guinness Peat. Its offer to buy the remaining shares values Tower at 19.1 times 2010 underlying earnings and represents “a compelling premium and a highly attractive outcome for our shareholders,” said Tower chairman Rob Thomas. The proposal was endorsed in the absence of a higher offer.
The offer values Tower Australia at A$1.76 billion compared to its most recent market capitalisation of A$1.15 billion. Dai-ichi is looking to expand outside Japan, where sliding premium income contributed to a 42% drop in first-half profit, and it flagged further investment in Australia after the acquisition of Tower.
“Dai-ichi has a strategy to increase its geographic diversification in the Asia-Pacific region and we look forward to further working with a trusted partner such as Tower, which is a profitable, growing company with good management,” said Takayuki Kotani, manager of the firm’s international business management department, in a statement.
“Beginning with this investment, Dai-ichi will strengthen its commitment to the Australian marketplace over time,” he said.
Dai-ichi has shown a willingness to place a higher value on Tower’s shares than the market. It acquired GPG’s stake at A$3.75 a share in 2008. That amounted to a 37% premium to the price before its announcement of the deal in August of that year, when the shares stood at about $2.73.
Tower Australia is that nation’s third-biggest life insurer. Dai-ichi’s offer requires approval of 75% of the remaining shareholders, who will vote on the proposal in the second quarter of 2011, according to a statement from Tower today.
Tower is being advised by Greenhill Caliburn and Blake Dawson. Dai-ichi’s advisers are Nomura and Freehills.