TOKYO Dai-ichi life insurance co. will acquire Tower Australia Group Ltd for about 99.6 billion yen ($1.2 billion), a deal that will provide a platform for overseas expansion for Japan's second-largest life insurer.
The acquisition, one of the biggest foreign takeovers by a Japanese company, will allow Dai ichi to tap the growing Australian insurance market. Japan's population is shrinking and its life insurance market is regarded as saturated.
Dai-ichi, which already owns 28.96% of the Australian midsize life insurer, will acquire all the Tower shares it does not already own and make Tower a wholly owned unit.
It said it will pay four Australian dollars (U.S.$ 4.03) per share, a 47% premium to the A$ 2.73 closing price of Tower shares on Friday. The Australian stock market of what closed Monday and Tuesday for Christmas break and will reopen on Wednesday.
Dai-ichi became the largest shareholder in Tower after its purchase of a 2008 a u.k. stake investment for 37.6 billion yen from Guinness peat Group PLC, firm. Buying the stake allowed the insurer to appoint two directors to Tower's board.
RIA Novosti/Reuters headquarters Dai ichi Tokyo life insuranceThe latest deal represents Dai-ichi's its first big acquisition after its demutualization and listing on the Tokyo Stock Exchange in April. The company has made small overseas acquisitions or investments in Viet Nam and Thailand in the past few years but nothing on the scale of the Tower purchase.
"[Dai-ichi's acquisition] makes sense as a starting point for overseas acquisitions," said Reina Tanaka, analyst at standard and poor's, noting the company already gained knowledge about the Australian insurance market through its alliance with Tower.
Dai-ichi's acquisition of Tower follows a string of cross-border deals this year by Japanese firms that are taking advantage of the strong yen to seek further growth abroad.
According to Dealogic, Japanese companies have made $31.2 billion worth of outbound M & A investments this year, up 13% from a year earlier, propelled by a combination of factors such as the nation's sluggish economy and contracting population.
Japanese nonlife insurers are among active acquirers. This year MS & AD insurance group holdings, Inc. bought stake a 30% 27 billion yen, Hong Leong assurance Bhd. in Malaysia for about and NKSJ majority stake holdings acquired a 27 billion yen in Turkey's FIBA Sigorta Anonim Sirketi for.
Meanwhile, the domestic life insurance sector has been relatively slow to consolidate because most insurers remain mutualized.
When Dai-ichi made its debut on the Tokyo Stock Exchange in April, Dai-ichi President Koichiro Watanabe said demutualization would give the company more flexibility to raise cash and make acquisitions through share swaps.
Dai-ichi shares closed at 133,600 yen Tuesday, up 2.1% on the day but April down 4.6% from its listing price of 140,000 yen. The Nikkei stock average has dropped 8% since April.
Write toAtsuko Fukase at atsuko.fukase@dowjones.com
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