Fairfax Financial Holdings Lt. will pay $144 million for New Zealand Insurer Tower Ltd. giving it an instant, significant presence in a growing, emerging market.
Tower’s board of directors has already unanimously approved the sale at about NZ $1.17 per share, or $NZ 197 million, a price that reflects a 48 percent premium to Tower’s closing share price on Feb. 8, according to the deal announcement. In U.S. dollars, that’s
$0.72 per share, or US $144 million at current exchange rates.
The sale is pending a number of closing conditions, such as approvals from the Reserve Bank of New Zealand, the New Zealand Overseas Investment Office, Pacific Island regulatory authorities and Tower Shareholders. A shareholder meeting to address the sale proposal will be held in April 2017, and 75 percent of votes cast must sign off on the measure, the dal announcement noted
Tower Ltd. is a holding company for Tower Insurance, a major insurer in New Zealand and the Pacific Islands with about 265,000 customers. It offers coverage focused on car, house, contents, business travel and other personal insurance lines.
Prem Watsa, Fairfax’s chairman and CEO, said the acquisition will give it a major foothold in New Zealand and nearby countries.
“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,” Watsa said in prepared remarks. “The acquisition … will provide us with an immediate significant presence, with a strong management team.”
Watsa added that Tower CEO Richard Harding will continue to lead the company, “in a market where Fairfax currently has limited exposure.”
Tower Chairman Michael Stiassny said that the insurer’s board of directors approved Fairfax’s proposal based on part on the “substantial premium” to Towers share price, plus support from two of Tower’s major shareholders, Salt Funds Management and ACC, which collectively hold 18.1 percent of Tower shares.
Fairfax is in the middle of a pending offer to buy insurer Allied World Assurance Co. for $4.9 billion in cash and stock. But it has also focused its expansion in different areas of the financial services spectrum. In December, Fairfax won regulatory approval to buy 51 percent of Catholic Syrian Bank Ltd., a major domestic lender in India.
Source: Fairfax Financial/Tower Ltd.