Australia’s Suncorp-Metway, Promina Group Sign Merger Agreement

Two of Australia’s largest financial/insurance groups, Suncorp-Metway Limited and Promina Group Limited, announced on Friday, Oct. 21, that they have entered into a Merger Implementation Agreement (MIA), which proposes that Suncorp will acquire all of Promina’s ordinary shares for approximately A$7.9 billion [US$6 billion].

“The Boards of both Suncorp and Promina each unanimously agreed to enter into the agreement that, when completed, will create the leading customer focussed diversified financial services provider operating in Australia and New Zealand,” said the bulletin.

Suncorp’s proposal involves exchanging 0.2618 of its shares and A$1.80 [US$1.3654] in cash for one share of Promina, whose shares have been trading in the A$6.75 (US$5.12) to A$6.80 (US$5.16) range. On a per share basis Suncorp’s offer is valued at around A$7.74 (US$10.20) based on its Friday closing price of A$22.70 (US$17.22).

The deal, which would create Australia’s second largest personal lines insurer, just behind the IAG Group, is subject to regulatory approval. Some analysts have expressed concerns that Australian anti-trust regulators might block it or seek changes, as it would leave the combined company and IAG with more than 80 percent of the country’s automobile insurance market and over 70 percent of the homeowners’ market..

Suncorp Chairman, John Story, said the signing of the MIA marked a transformational milestone for his organization and created an exciting opportunity for all of the stakeholders of both organizations. “The combination of these two highly successful companies has significant strategic merit and will create a vigorous and dynamic competitor in the Australian and New Zealand financial services market place,” he stated in a press bulletin.

“The transaction will provide enormous benefits, particularly for customers of both companies who will have access to an even greater range of products and services specific to their individual needs, and delivered through a range of brands that are well known and respected in their individual markets,” he continued. “We are enthusiastic about the future of the combined organization and believe our proposal is attractive to both Promina and Suncorp shareholders, as well as the customers of both businesses.”

In outlining his view of the agreement, Promina Chairman Leo Tutt indicated that the combined group will continue the excellent track record of both organizations in creating sustainable value for shareholders. “In making this decision, we are satisfied that the agreement has been struck in the best interests of shareholders of both organizations,” he noted. “Post the implementation of this transaction, shareholders in the combined group will continue to leverage the best aspects of these two outstanding companies.”

The two companies hope to complete the merger by the end of December.

Further details and a replay of the presentations to investors and the media are available on the Promina Website at: http://www.promina.com.au. and on the Suncorp Website at: http://www.suncorpmetway.com.au.