UPDATE: Vero drops takeover appeal after Tower terminates agreement
(Recasts on Vero appeal, share drop and updates share price)
By Paul McBeth
Nov. 7 (BusinessDesk) - Suncorp Group-owned Vero Insurance has ditched a planned appeal of a rejected takeover bid for Tower after the New Zealand insurer terminated their arrangement. The shares dropped.
Auckland-based Tower terminated a scheme implementation agreement with Vero after the deal passed its end date, but has told the Australian insurer it's willing to discuss new terms once it has raised capital. The $236 million takeover was blocked by the Commerce Commission over competition concerns, and Vero has now decided to drop a planned appeal that was scheduled to be heard in January. The Australian insurer is now focused on "maximising the value" of its 19.99 percent stake in Kiwi firm.
"Tower has advised Vero that it is willing to negotiate a new SIA, which may result in changes to key terms, following completion of its plans to raise further capital," chair Michael Stiassny said in a statement to the ASX yesterday. "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."
In May, Tower reported a loss of $8.4 million for the six months ended March 31, narrowing from a loss of $8.7 million a year earlier, as the company struggled with escalating costs from the 2010 and 2011 Canterbury earthquakes. The need for capital and a proposed restructuring shook out competing bids from Vero and Canada's Fairfax Financial Holdings, with the Australian-owned company ultimately winning over the Tower board before the regulator's decision.
Tower shares fell 6.8 percent to 75 cents on the NZX. Vero offered $1.40 a share, trumping Fairfax Financial's bid at $1.17 a share.