Dai-Ichi Life plans to buy re­main­ing stake of Tower Aus­tralia

The Pak Banker - - Company& -

TOKYO: Dai-ichi Life In­surance Co., Ja­pan's sec­ond­biggest life in­surer, agreed to buy a full stake of Tower Aus­tralia Group Ltd. for A$1.2 bil­lion ($1.2 bil­lion), its biggest over­seas ac­qui­si­tion.

Dai-ichi Life, which owns 29 per­cent of Tower Aus­tralia, will buy the re­main­ing shares in the first half of next year, the Tokyo-based com­pany said in a state­ment to­day. The trans­ac­tion is ex­pected to close in May.

The Ja­panese in­surer sold shares to the pub­lic in April to fill its war chest for ac­qui­si­tions as the econ­omy is fore­cast to slow to 1.5 per­cent next year and the pop­u­la­tion ages faster than other de­vel­oped na­tions. Aus­tralian work­ers will in­crease pen­sion sav­ings to A$6.1 tril­lion by 2035, from A$1.1 tril­lion in July, ac­cord­ing the govern­ment.

"It is vi­tal for in­sur­ers to move and con­duct busi­ness over­seas," said Win­ston Barnes, head of sales and trad­ing for Asian mar­kets at WJB Cap­i­tal Group Inc. in San Fran­cisco. "It is hard to judge whether this is a wise use of their cap­i­tal at present, for in­vestors will have to wait years to po­ten­tially re­al­ize a pos­si­ble re­turn on in­vest­ment."

Dai-ichi Life rose 2.1 per­cent to 133,600 yen at the 3 p.m. close of Tokyo trad­ing. The shares have fallen 18 per­cent since list­ing on the Tokyo Stock Ex­change. Tower Aus­tralia slid 1.1 per­cent to A$2.73 in Syd­ney at the close of trad­ing on Dec. 24.

The ac­qui­si­tion rep­re­sents a 46.5 per­cent pre­mium over Syd­ney-based Tower Aus­tralia's share price be­fore the an­nounce­ment, Dai-ichi Life said. It said it plans to ac­quire stock op­tions held by man­agers at Tower for about A$70 mil­lion.

Tower trades at 1.3 times its book value, the sec­ond low­est among six Aus­tralian in­sur­ers tracked by Bloomberg. Dai-ichi's of­fer of A$4.00 a share val­ues the stock at 1.95 times, higher than the 1.8 mul­ti­ple for the six com­pa­nies, ac­cord­ing to data com­piled by Bloomberg.

Tower con­firmed that Dai­ichi made the of­fer and its di­rec­tors met to con­sider it, Ian Smith, a spokesman for the com­pany, said in an e-mailed state­ment.

"Dai-ichi has en­joyed an ex­cel­lent re­la­tion­ship with Tower since in­vest­ing in 2008 and has demon­strated strong sup­port in man­age­ment and staff," said Smith, a part­ner at Ade­laide-based Be­spoke Ap­proach, a firm that ad­vises Tower. The Aus­tralian govern­ment is in­creas­ing in­cen­tives for peo­ple to save for re­tire­ment, this month mov­ing to cut pen­sion fees by A$2.7 bil­lion.

The MySu­per plan may re­duce fees savers pay to as­set man­agers by 40 per­cent, help­ing the av­er­age worker re­tire with an ex­tra A$40,000, ac­cord­ing a govern­ment-com- mis­sioned study.

In Novem­ber, Tower Aus­tralia said full-year net in­come rose 88 per­cent to A$87.4 mil­lion.

"The life in­surance mar­ket in Aus­tralia has shown steady growth, re­flect­ing fa­vor­able eco­nomic con­di­tions," Dai­ichi said in the state­ment, adding that it "es­pe­cially sees growth op­por­tu­ni­ties in the risk in­surance mar­ket."

The in­surer, es­tab­lished in 1902, pur­chased about 30 per­cent of Tower Aus­tralia from Guin­ness Peat Group Plc for 37.6 bil­lion yen ($456 mil­lion) in 2008. The Ja­panese com­pany also has op­er­a­tions in Viet­nam, In­dia and Thai­land.

Ja­pan's life in­sur­ers are strug­gling for new cus­tomers af­ter the first global re­ces­sion since World War II. One in five Ja­panese cit­i­zens is over 65 years old. Only 13 per­cent are un­der 15, ac­cord­ing to govern­ment statis­tics.

The nation's econ­omy will grow 1.4 per­cent in 2011, ac­cord­ing to the me­dian es­ti­mate of econ­o­mists sur­veyed by Bloomberg News. That com­pares with growth of 9 per­cent pro­jected for China and 2.6 per­cent in the U.S., the es­ti­mates show.

Last month, Dai-ichi Life said first-half net in­come fell 42 per­cent to 29.4 bil­lion yen from a year ago as pre­mium in­come and the value of in­vest­ments de­clined. Pre­mium in­come fell 15pc to 1.67 tril­lion yen. -Bloomberg

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