Tower insurance shares soar 42%

on directors’ Dai-ichi nod

December 29, 2010

Australia Tower Group shares surged 42 per cent to a record high as investors supported an all-cash takeover offer from the company’s Japanese cornerstone investor Dai-ichi Life Insurance.

Tower said today its directors recommended shareholders accepted Dai-ichi’s $4 per share, or $1.2 billion, offer to buy all shares it does not already own in the specialist life insurer.

The stock touched $3.88 – Tower’s highest-ever share price since splitting from New Zealand-based Tower in December 2006 – before closing up $1.14, or 41.8 per cent, at $3.87.

Over 20 million shares were traded during the day, Tower’s best daily turnover since October 2008.

IG Markets strategist Ben Potter said the hefty 46.5 per centage  premium to the Christmas Eve closing share price of $2.73 would have ruled out a competing offer.

‘‘I’d be expecting no other bidders around that price,’’ Mr Potter said.‘‘I don’t think people wouls have to think too long and hard about selling their shares at $4.’’

Dai-ichi’s offer to buy the remaining 71.04 per cent of Tower, made yesterday, valued all of Tower at $1.76 billion.

Dai-ichi general manager of international business management department, Takayuki Kotani, said the deal allowed Japan’s number two life insurer to increase its geographic diversification in the Asia Pacific region.

Mr Kotani described Tower as a profitable, growing company with good management and he flagged having a greater presence in Australia in the time ahead.

‘‘Beginning with this investment, Dai-ichi will strengthen its commitment to Australian marketplace over a period of time,’’ Mr Kotani said in a statement.

Dai-ichi, which bought its stake in Tower in August 2008 for $376.3 million and also holds insurance interests in Vietnam, Thailand and India, indicated it wished to keep the Australian insurer’s current management and independent directors in place.

Tower chairman Rob Thomas said the independent directors believed that the offer represented a ‘‘compelling premium and a highly attractive outcome’’ for shareholders.

Managing director Jim Minto said having Dai-ichi as a cornerstone shareholder for the past two years had been of great benefit to Tower’s business partners and customers.

‘‘Dai-ichi is a major life company and there is a strong natural fit that will allow continued benefits to flow for Tower’s customers, staff and business partners,’’ Mr Minto said in his statement.

Dai-ichi listed on the Tokyo stock exchange in April this year, after an initial public offering that raised $US11 billion ($10.92 billion).

Tower’s yearly results, released last month, showed the specialist life insurer’s net profit rose 88 per cent to $87.4 million in fiscal 2010 and a return on capital of 10.3 per cent.

The company did not release earnings guidlines, but said at the time it was targeting an 11 per cent return on capital in fiscal 2011 and a 13 per cent return in three years.

The directors’ recommendation of the Dai-ichi bid, which would be via a scheme of arrangement, is subject to the absence of a superior proposal and the outcome of an independent expert’s report.

It also requires court approval, the go-ahead of Tower shareholders, as well as the go ahead from Australian and Japanese authorities.

Sourced & published by Henry Sapiecha