The board of local insurance company Tower has given its backing to a takeover offer by Australian giant Suncorp.
Suncorp, which is making the offer through its local business Vero, raised its offer 10 cents a share yesterday to $1.40, valuing Tower at about $236 million.
The revised Australian offer has trumped a bid by Canadian company Fairfax Financial Holdings, which offered $1.17 a Tower share.
Tower chairman Michael Stiassny said the board had been looking to get the best value for shareholders, and while it had originally backed the Canadian bid, Fairfax had said it would not increase its offer, making Suncorp the best on the table.
"The Board has been adamant that all shareholders benefit equally from any sale. We are pleased that Suncorp has seen fit to increase their non-binding indicative offer from $1.30 per share to a firm offer that meets the price previously paid to a minority of institutional investors," he said.
Suncorp already has a 19.9 percent stake in Tower, and it will need Commerce Commission clearance, because the Australian company is a big player in the New Zealand market with the Vero, AA Insurance and Asteron brands.
However, the planned takeover is being done by a scheme of arrangment, meaning Suncorp will need at least 75 percent of shareholder votes cast in favour at a special meeting, and those votes must represent more than 50 pct of the total voting rights of the company.
Suncorp New Zealand chief executive Paul Smeaton said on Monday the proposed takeover would benefit both companies, strengthening its own position in this country as well as offering Tower a wider sales base.
"We are also committed to protecting Tower's unique strengths through complementary multi-brand distribution and offering Tower's customers access to a broader range of products and services," he said.
Tower has been struggling over the past two years with lingering, complicated and costly claims from the 2010/11 Canterbury earthquakes, and ageing IT systems that needed to be replaced.
In May, the company reported a smaller half year loss, but it has been forced beefed up its finances by $30m to make sure it's strong enough to cope with any pressure from claims, and has been saving cash by suspending dividends.
Tower shares, which had been on a trading halt, jumped more than 14 percent or 16 cents to $1.32, when it resumed trading.