Tower's $118 million bid for Fidelity Life could struggle on advice the life insurer's two major shareholders – with a combined 70% stake – will not accept the offer.Fidelity Life has written to shareholders instructing them to take no action
Tower’s $118 million bid for Fidelity Life could struggle on advice the life insurer’s two major shareholders – with a combined 70% stake – will not accept the offer.
Fidelity Life has written to shareholders instructing them to take no action on the “unhelpful” offer for $82 a share but instead wait for the formal takeover offer to be made and to receive the board’s assessment.
Tower’s proposed offer, made up of $55 in cash and $27 in Tower shares, is conditional on a 90% level of acceptances and receipt of certain financial information being provided to Tower.
Fidelity chairman Ian Braddock said in the letter the board had been advised the company’s two major shareholders, who together own 70% of the company, would not be accepting the intended offer.
He also indicated Fidelity’s reluctance to open its books to its larger rival.
“Tower is a competitor and so we do not believe it would be in the best interests of shareholders for us to provide any confidential or sensitive information to Tower in relation to this proposed offer,” he said.
Fidelity Life provides life insurance, business insurance, savings and investment products in New Zealand, as well as KiwiSaver products and last week revealed a record net profit of $16.9 million for the year to June, up 63% on the same time last year.
Mr Braddock said the company, founded by life adviser Gordon Watson in 1973, remained committed to the independent adviser network model it considered integral to its success.
Tower. 35% owned by Guinness Peat Group, has been on the lookout for a suitable acquisition for some months and its chairman Tony Gibbs said the two companies fitted together “hand and glove.”
Tower chairman Tony Gibbs has described the bid as “friendly” and the inclusion of Tower shares in the offer would enable Fidelity shareholders to retain an interest in the combined company, but with liquidity not previously available to them.
Fidelity Life chief executive Milton Jennings said although Tower’s offer was unsolicited, he wasn’t entirely surprised by the move.
“We always knew we would be subject to this because of the structure of our shareholding, so we’re not 100% surprised. And in a small market you don’t get a lot of choice as to who you can take out,” he said
Tower’s $82-a-share offer represents a small premium to the price Fidelity last fetched before the offer.
Fidelity Life’s board is in the process of evaluating the notice as required by the Takeovers Code and is engaging an independent financial adviser to report on the merits of the offer
Findings will be released with the target company statement.
