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Bid By Tower Undervalues Fidelity

Fidelity, an unlisted company with approximately 150 shareholders, is the largest New Zealand owned and operated investment and life insurance company. It is currently in the midst of a potential takeover bid by Tower. This bid for $118 million is conditional upon acceptance from at least 90% of Fidelity’s shareholders.

However, there is a great deal of opposition from Fidelity shareholders to the takeover bid from Tower, including that from Farmers Mutual Group, or FMG. FMG, a holder of 10.8% of Fidelity, opposes the bid for two reasons. First, it is felt that the bid is unrealistic and that it greatly undervalues Fidelity as a company. In addition, a spokesman from FMG stated that the takeover bid could put Fidelity’s proven performance and track record unnecessarily at risk.

Other shareholders, including the Fidelity Family Trust trustees Jeffrey Meltzer and Michael Whale, and Mary and Gregory Burgess – who combined make up 70% of Fidelity ownership – also oppose the takeover bid by Tower, and have even stated that they will not accept the offer.

The bid by Tower for Fidelity comes just after AMP’s acquisition bid for AXA Asia Pacific that was tendered in November 2009.

Acquisition of Fidelity Life Insurance Would Make it Third Largest Life Insurer

If the AXA and Tower’s acquisitions succeed, then AMP and AXA would become the second largest insurance company in New Zealand with a combined share of 20%. These moves would also put Tower and Fidelity in the number three spot with a 10.4% share.

Sovereign, New Zealand’s largest insurer, says that the move by Tower is, although interesting, not surprising since Tower raised over $80 million for acquisition last year. Although a Sovereign spokesman also stated that the company would welcome the challenge of another strong player in the insurance market. He also stated that it is likely that there will be even more industry competition in the future due to the recent significant regulatory and tax changes.

At this time, Tower is slotted at number 9 in the risk and insurance market with 4.9%, and Fidelity is currently at number 8, with a 5.5% market share. AMP is presently ranked number 2 with a 10.1% share, with AXA sitting at number 3 with a market share of just under 10%.

The bid by AMP for AXA already has received approval from the Australian Competition and Consumer Commission and the New Zealand Commerce Commission. All four of the companies discussed have interests in both managed funds as well as in insurance.

Creative Commons License photo credit: Lordcolus

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