26 Jul 2017

ComCom rejects Australian bid for Tower Insurance

10:35 am on 26 July 2017

The Commerce Commission has rejected a bid by an Australian firm to buy all of Tower Insurance.

Commerce Commission

Photo: RNZ / Alexander Robertson

Suncorp Australia offered $1.40 a share through its local operation Vero, valuing Tower at about $236 million.

It already has a nearly 20 percent cornerstone stake.

Commerce Commission chair Mark Berry said it has rejected the bid because of competition fears.

"The merger would remove Tower as the only independent competitor to Vero and IAG with the scale, brand strength and experience to compete effectively across the breadth of personal insurance markets," he said.

Dr Berry said without that competition, there was a real risk consumers would pay higher prices for insurance.

The proposed deal would have brought together the second and third largest insurers for domestic house, contents and private motor vehicle insurance, giving the merged company - which would include the Vero, AA and Asteron brands - about a third of the market.

The merger would have left the New Zealand market dominated by IAG, which has the State and AMI brands, and Suncorp.

Tower's board supported the Australian offer after Suncorp trumped the $1.17 per share bid by Canadian company Fairfax Financial Holdings.

Tower has been struggling over the past couple of years with lingering, complicated and costly claims from the 2010 and 2011 Canterbury earthquakes, along with old IT systems.

The decision by the Commerce Commission is the latest in a series of rejections. Other planned mergers declined recently include Fairfax and NZME, Sky and Vodafone, and fire sprinkler and alarm companies Aon and Fire Protection Inspection Services.

Suncorp Australia has 20 working days to lodge an appeal.

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