Tower accepts Dai-ichi’s $1.2 billion takeover offer

SYDNEY (BestGrowthStock) – Tower Australia Group Ltd (TAL.AX: ), the country’s fifth biggest life insurer, agreed to a $1.2 billion takeover offer from top shareholder Japan’s Dai-ichi Life Insurance (8750.T: ), adding to the string of deals in Australian wealth management and insurance.

Tower, the biggest independent insurer in a market dominated by the top banks and AMP (AMP.AX: ), said its directors unanimously recommend the takeover approach at A$4.00 per share or at a 47 percent premium to the Friday close.

“The valuation is pretty attractive,” Mark Daniels, head of equities at Aberdeen Asset Management said. Aberdeen owns Tower shares.

“The timing was a bit surprising, though on the longer-term one would have expected the deal given Dai-ichi’s stake in Tower rising Japanese interest in overseas firms for growth.”

Dai-ichi already owns 29 percent of Tower and is eyeing the deal to expand away from a stagnant home market.

Australia wealth and life insurance by virtue of being one of the few growing segments of the country’s financial services sector is attracting a string of deals.

The wealth management market, at $1.2 trillion, is expected to grow over 12 percent per year for the next five years while life insurance rings in revenues of A$12 billion a year.

Tower said it expects to put the deal, which valued it at 19.1 times 2010 underlying earnings compared with 17.1 times for AMP’s $13 billion takeover of AXA Asia Pacific (AXA.AX: ), for a shareholder vote in second quarter of 2011.

In addition to AMP’s deal for AXA Asia, top lender National Australia Bank (NAB.AX: ) bought Aviva’s (AV.L: ) Australian wealth unit late last year while Australia and New Zealand Banking Group (ANZ.AX: ) bought out its wealth management joint venture partner ING (ING.AS: ).

“Dai-ichi is a major life company and there is a strong natural fit,” Tower Chief Executive Jim Minto said in a statement. “Tower will have the benefit of the backing of the top ten life insurers in the world based on revenue.”

Tower is being advised by Greenhill Caliburn while Dai-ichi is advised by Nomura.

(Reporting by Narayanan Somasundaram; editing by Balazs Koranyi)

Tower accepts Dai-ichi’s $1.2 billion takeover offer