ComCom declines Vero/Tower merger
The Commerce Commission is signalling a high tide mark for mergers in the general insurance market, turning down an application by the second and third largest providers of house, contents and vehicle cover, Vero New Zealand and Tower.
Owned by Brisbane-based Suncorp, Vero sought permission to acquire Tower's operations after winning a bidding war with Canada's Fairfax Financial Holdings in a deal that valued Tower at $236 million.
“The merger would remove Tower as the only independent competitor to Vero and IAG with the scale, brand strength and experience to compete effectively across the breadth of personal insurance markets," said commission chair Mark Berry. "While there are other smaller competitors in personal insurance, we do not consider that they replicate the level of constraint that Tower imposes.
"Without the competition that Tower provides, there is a real risk that consumers would end up paying higher prices for insurance cover while receiving lower quality, such as reduced insurance coverage,” Berry said. "There is also a real chance that Tower would be purchased by a third party further enhancing Tower’s significance as an independent competitor in the market.”
IAG, also Australian-owned, offers general insurance through its State and AMI brands in New Zealand.
Vero was to have paid $1.40 a share to buy NZX-listed Tower, trumping FFH's $1.17 a share a offer.
In a statement, ASX-listed Suncorp said it was disappointed by the application's rejection, which the company would review before commenting further.