Tokyo: Dai-ichi Life Insurance Co will take full control of Tower Australia Group Ltd for $1.2 billion (Dh4.4 billion) in cash, the latest in overseas acquisitions by Japanese insurers keen to move away from a stagnant home market.
It is the first major purchase by Japan's No 2 life insurer since its $11 billion stock market debut in April, and is another deal for Australia's $1.2 trillion wealth management sector, which is growing thanks to compulsory private pension schemes.
Springboard
While Dai-ichi did not raise any money through its IPO, it said it would use it as a springboard to push into overseas markets to address concerns about its growth prospects in Japan, where the population is shrinking.
It will pay A$4.00 (Dh14.90) per share for all the shares it does not own in Tower Australia, a 47 per cent premium over Tower's latest closing price. Dai-ichi is currently the biggest shareholder in the midsized life insurer, with a 29 per cent stake.
"This is a positive move," said Ryosuke Okazaki, chief investment officer at ITC Investment Partners in Tokyo.
"Top management is being decisive and if it did not take steps like this there wouldn't have been any point to it becoming a listed company."
The buyout ranks as the Japan's third biggest insurance acquisition after Tokio Marine Holdings, Japan's No 2 non-life insurer, spent $4.7 billion to buy US insurer Philadelphia Consolidated and £442 million (Dh2.51 billion) to buy Lloyd's of London insurer Kiln Plc.
Overseas acquisitions made by Japanese insurers hit a peak in 2008 with 547 billion yen (Dh24.5 billion) worth of deals struck. This year there has been 109 billion yen worth of transactions made.
Dai-ichi said the deal will increase the amount of net profit derived from overseas to 9 per cent from 3 per cent. It had 55.6 billion yen net profit for the year ended March 2010.
Dai-ichi also has minority stakes in Ocean Life Insurance Co in Thailand and Star Union Dai-ichi Life Insurance Co in India.
Australian market
Australia's wealth management sector is the world's fourth-largest and has recently seen much merger activity, with Australian wealth manager AMP and French insurer AXA SA launching a new $13.1 billion-plus bid for AXA Asia Pacific last month.
Private equity firm Kohlberg Kravis Roberts and Co offered $1.7 billion for wealth manager Perpetual, although the deal fell through this month.
Tower Australia's principal activities include life insurance, funds management, superannuation, financial planning, and investment management.
Dai-ichi's shares rose 2.1 per cent to 133,600 yen in Tokyo after the Nikkei business daily first reported the deal earlier yesterday.
