9 February 2017Insurance

Fairfax acquires New Zealand’s Tower Insurance in all-cash deal

Canada-based Fairfax Financial Holdings, a property and casualty re/insurer, has agreed to acquire New Zealand-based general insurer Tower for an all-cash deal.

Fairfax will acquire 100 percent of Tower shares at NZ$1.17 ($0.84) per share for an aggregate acquisition cost of NZ$197 million ($144 million). The price per share represents a premium of 48 percent to

Tower's closing share price on 8 February and a 47 percent premium to Tower's three-month volume weighted average price (VWAP).

"The acquisition of Tower will provide us with an immediate significant presence, with a strong management team, which will continue to be led by Richard Harding, in a market where Fairfax currently has limited exposure,” said Prem Watsa, chairman and CEO of Fairfax.

"Tower is one of the largest insurers in New Zealand and the Pacific Islands, with a long-standing history, good brand recognition and a strong market position.

"The key factors in Fairfax's ability to present an attractive proposal to Tower were the speed at which the transaction could be conducted, the reputation of Fairfax for closing transactions and treating stakeholders fairly," he added.

Michael Stiassny, chairman of Tower, said: "Given the substantial premium to Tower's share price, the certainty provided by the Fairfax Proposal and the support it has received from Salt Funds Management and ACC, the Board determined to unanimously recommend the Fairfax Proposal to all shareholders, in the absence of a superior proposal. Tower's separation strategy will be pursued in the event that the Fairfax Proposal is not successful."

Fairfax is finally set to acquire Allied World, it's recent deal for a sum of $4.9 billion, after Allied failed to find an alternative acquirer in its 30-day 'go-shop' period.

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More on this story

27 June 2017   Suncorp subsidiary Vero Insurance has won the battle to acquire New Zealand-based general insurer Tower, beating Fairfax Financial's $144 million all-cash offer.
26 July 2017   New Zealand's Commerce Commission has declined to grant clearance to Suncorp subsidiary Vero Insurance to acquire up to 100 percent of the shares in general insurer Tower.
1 March 2018   New Zealand-based general insurer Tower has entered into a $22 million settlement agreement with Hong Kong's Peak Re regarding an adverse development cover policy entered in 2015.