Sun­corp left with Tower stake as NZ dumps deal

Townsville Bulletin - - NEWS - LIAM WALSH

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”.

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