Australia-based life insurer Tower Australia Group Ltd. said late Thursday that Japan-based Dai-ichi Mutual Life Insurance Co. has agreed to acquire the entire 29.73% stake in Tower Australia from UK-based investment company Guinness Peat Group plc. or GPG (GPG.L,GPGPF.PK) at A$3.75 per share or about A$376 million. Dai-ichi would acquire the stake held by veteran corporate raider Sir Ron Brierley's company in three tranches and is expected to take two board seats, vacated by GPG nominees.
Pursuant to the acquisition, Dai-ichi has currently become a major strategic and cornerstone shareholder of Tower Australia, effective August 8, 2008. Dai-ichi Life's investment represents its entry into Australia's fast growing life insurance market, which is underpinned by solid industry fundamentals and a stable political and regulatory environment.
In a statement, Tower Australia Chairman Rob Thomas said, "We are delighted to welcome Dai-ichi Life as a cornerstone shareholder in TOWER Australia. Dai-ichi Life will bring significant additional expertise from their existing life insurance operations in Japan and Asia."
Dai-ichi has already acquired a 14.9% stake from GPG at a price of A$3.75 per share, while another 5% would be acquired following approval by the Foreign Investment Review Board and the Australian Prudential Regulation Authority. The remaining 9.8% would be acquired following regulatory approvals and approval of Tower Australia shareholders. Tower Australia would be reimbursed for its costs and expenses associated with the transaction, irrespective of the outcome of the shareholder approval process.
Tower Australia directors would now meet and unanimously recommend Tower Australia shareholders to vote in favor of the resolution to approve the acquisition by Dai-ichi Life of the final stake of 9.8%. The shareholder meeting is slated to be held in October at Sydney. Following the shareholder approval, Dai-ichi Life will be invited to nominate two directors to join the board of Tower Australia to replace the GPG nominees, who resigned today.
"We have enjoyed working with GPG and thank them for their significant support and assistance as an investor and on the Board over the past five years," Thomas added.
Dai-ichi Life is the First and oldest mutual insurance company and the second largest private life insurance company in Japan, which is the world's second largest insurance market. Based on premium income of A$33.9 billion, it is one of the world's top ten life insurers.
Dai-ichi Life has a Standard & Poor's financial strength rating of A and a Fitch financial strength rating of A+. With over 100 years of success in the insurance market, Dai-ichi Life in recent times has been developing business interests outside of Japan. This includes its recent investments in Taiwan, Vietnam, India and Thailand.
Tower Australia and Dai-ichi Life have entered into a Business Co-operation Agreement covering a range of strategic and operational matters, which would become operational pursuant to the acquisition of the entire 29.7% stake.
The business co-operation agreement provides Tower Australia an opportunity to share Dai-ichi Life's expertise in product development, bancassurance, marketing, underwriting, agency training, information technology and investment management. Further, Dai-ichi Life will use its strong relationships with Australia-based affiliates of leading Japanese companies to enroll them in group insurance schemes.
Tower Australia noted that there would no change in management or its strategies as Dai-ichi Life wants to preserve the value of what has already been created.
Tower Australia is being advised by Caliburn Partnership as financial adviser and Minter Ellison as legal adviser. Dai-ichi Life is being advised by ABN AMRO Australia as financial adviser and Freehills as legal adviser.
On the LSE, GPG.L closed Thursday's regular trading at 48.10 pence, down 2.90 pence or 5.69% on a volume of 684 shares. In the 52-week period, the stock has been trading in a range of 48.20 to 73.00 pence.
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