Suncorp left with Tower stake as NZ dumps deal
SUNCORP has been left holding a $ 30 million stake in New Zealand insurer Tower after that nation’s competition regulator blocked the Queensland company’s takeover bid.
The rejection up- ends a $ 225 million bid only one month after Suncorp expressed confidence “of the strong basis for approval” by NZ’s Commerce Commission.
But the commission yesterday outlined concern about Suncorp buying out Tower, which Credit Suisse analysts estimated had about 10 per cent of NZ’s personal insurance market.
“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,” NZ Commerce Commission chairman Mark Berry said.
Dr Berry told Newscorp that NZ had only three significant insurers, including Suncorp’s Vero and Sydney- based IAG. He said smaller insurance rivals would not represent the same level of competition as Tower.
Suncorp could appeal, he said. Each case had its own circumstances but Dr Berry said the commission legally had a “very high success rate”.
About 85 per cent of mergers in the past five years had been cleared in the first round, Dr Berry said.
The move raises questions about the original predator of Tower, Canada’s Fairfax Financial, whom Suncorp outbid with a $ NZ1.40 ($ A1.32) a share offer.
Fairfax’s bid is no longer alive but it could theoretically look at another play. Suncorp had bought 19.9 per cent in Tower for its bid, but that stake’s value slumped 28 per cent to $ NZ30.5 million yesterday with the share price down NZ35.5c to NZ90.5c.
Suncorp said it was disappointed and would consider the decision. It did not believe buying Tower “would substantially lessen competition”.