Japan’s Dai-ichi Life to Take over Australia’s Tower Group for $1.2 Billion

By Isabel Reynolds and | December 28, 2010

Japan’s Dai-ichi Life Insurance Co said it would buy the shares it does not already own in Tower Australia Group Ltd for 99.6 billion yen ($1.2 billion) as it seeks expansion overseas.

Japan’s No.2 life insurer said it would pay A$4.00 [US$4.039] per share for Tower Australia, a 47 percent premium over its latest closing price. Dai-ichi said it would use cash to finance the acquisition and aims to complete the transaction in May.

This marks the first major deal by Dai-ichi since it listed its shares on the Tokyo Stock Exchange in April after an $11 billion initial public offering.

At the time of its IPO, Dai-ichi Life said it would push into overseas markets to address concerns about its growth prospects in Japan, where the population is shrinking.

Dai-ichi, the largest shareholder in Tower Australia with a 29 percent stake, also has minority stakes in Ocean Life Insurance Co in Thailand and Star Union Dai-ichi Life Insurance Co in India.

“This acquisition would fit with Dai-ichi’s strategy to expand in overseas markets where the growth is seen,” said Hidemasa Mizumoto, an analyst at Mizuho Investors Securities Co.

OVERSEAS M&A
Dai-ichi Life’s shares rose 2.1 percent in Tokyo ahead of the company’s official announcement after the close of trade. The Nikkei newspaper had first reported the deal earlier on Tuesday.

Dai-ichi’s stock has wallowed below its IPO price for almost six months since its market debut. It went public by distributing shares to policy holders through a process called demutualization and did not raise any money from the IPO.

Tower Australia shares closed at A$2.73 [US$2.757] on Friday. The Australian stock market reopens on Wednesday after an extended Christmas break.

Japanese companies have been actively seeking overseas acquisitions to secure growth outside their mature home market, while taking advantage of the increased purchasing power provided by the recently stronger yen.

“If Dai-ichi Life buys overseas firms in the future it could sell new shares to raise funds, which is negative for existing shareholders,” Mizumoto of Mizuho said.

(Reporting by Isabel Reynolds in TOKYO and Nivedita Bhattacharjee in BANGALORE; Editing by Nathan Layne and Muralikumar Anantharaman

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