Suncorp Group's Vero Insurance has sold its cornerstone stake in rival insurer Tower to US private equity firm Bain Capital for $53.9 million, registering a $7.5m loss in the process.
The Australian-owned insurer has spent $60.5m building up and retaining a 19.99 per cent shareholding in NZX-listed Tower before mounting a $236m takeover bid that was rejected by the Commerce Commission over fears it would detract from local competition.
Vero bought shares at an average entry price of 91 cents a share including via participation in Tower's deeply discounted rights issue at 42 cents a piece. It was offering $1.40 a share in its failed takeover attempt.
Vero today said it sold its shares to Bain Capital at 80 cents a share, amounting to $53.9m in total. Tower's NZX-listed shares closed at 78 cents yesterday and were up 3.9 per cent at 81 cents today.
"Total losses amount to $7.5m which was within our risk appetite given the compelling nature of the transaction to acquire 100 per cent of Tower and the value creation it would have achieved," a spokesman said in an emailed statement.
Suncorp New Zealand recognised a $12m loss on the value of its Tower stake when reporting its first-half results last month, and today's sale is at a premium to that, meaning it will register an $8.5m gain on the sale.
At the time, NZ chief Paul Smeaton said his firm would "only divest that asset when we actually see an offer that actually reflects what we believe is the true value of it" and wasn't "interested in any fire sale".
Tower chair Michael Stiassny acknowledged the sale in a statement to NZX, saying the insurer "welcomes its new largest shareholder, Bain Capital Credit, and looks forward to working with them."
Bain Capital manages US$75 billion ($102b) of assets around the world has invested in this part of the world before, including ownership of MYOB which was subsequently floated, a stake in Metro Performance Glass before its initial public offering, and General Electric's Australian and New Zealand commercial lending and leasing portfolio.