Suncorp ups Tower bid
SUNCORP has pumped up its bid for New Zealand’s Tower by almost $15 million, as the Brisbane-based finance giant tries taking over an insurer that prides itself on being “owned by Kiwis”.
Shares in Tower were placed in a trading halt yesterday morning as the Aucklandbased insurer’s board assessed the new Suncorp offer of $NZ1.40 ($A1.35) a share.
Tower had earlier been the target of a bid from Canada’s Fairfax Financial at $NZ1.17 a share. Then Suncorp in February stepped in with a bid of $NZ1.30 and snaffled 11 per cent of stock at that price.
A month later Suncorp was back in the market buying more stock at $NZ1.40 a share to grab a 19.9 per cent stake – a weighty shield against rival offers.
Under NZ law, Suncorp was not obliged to then offer that higher price for the rest of Tower.
But market watchers thought the Brisbane-based outfit would likely raise the price because it would look bad
in the market if they stuck to the lower one.
“They’re not going to hurt their reputation … by trying to nickel and dime their way through New Zealand,” said Hunter Green Institutional Broking’s Charlie Green.
The latest bid is worth roughly $A225 million, based on today’s currency and the initial stake, as opposed to $210 million on the earlier bid.
Mr Green said a higher rival bid was possible. He also thought if Suncorp’s bid was successful that it would be a relatively “clean sailing” in terms of merging.
Suncorp might be able to cut more than 20 per cent of Tower’s cost base, although job losses might be restricted to attrition rather than redundancies, Mr Green said.
Already with a large presence in NZ via the Vero brand, Suncorp said acquiring Tower would help strengthen its strategic position.
One potential hurdle is Tower’s branding if taken over by foreign operators like Suncorp – Tower already tells customers that “unlike many insurance companies in New Zealand, we’re owned by Kiwis like you and a few smart folk from overseas”.
“When we say that we’re looking out for you, you know we can because we’re Kiwis too,” its branding says.
Mr Green thought Suncorp would take a cautious approach to merging with Tower and could possibly keep running dual brands for some time.
Suncorp has been mum on what it plans to do with Tower’s operations in Pacific Islands, where Suncorp does not operate currently. Tower earned 26 per cent of last year’s $NZ20.1 million in profits from Pacific Islands, such as PNG, the Solomons and Vanuatu.