NZ Super Fund as a major shareholder will provide new capital which will enable the company to accelerate its growth strategy, Fidelity Life Chair, Brian Blake, said in a joint statement issued on Tuesday.
The proposed investment is to be made up of $75 million of new shares issued to the NZ Super Fund at $115 per share and the acquisition of a minimum of $25 million of existing shares. As part of the acquisition of existing shares, eligible minority shareholders (including all New Zealand resident shareholders) will have the opportunity to sell some or all of their shares to the NZ Super Fund for $130 per share.
This offer does not extend to the company’s majority shareholders. The NZ Super Fund will acquire shares from the Fidelity Family Trust at $115 per share.
“If our shareholders provide the necessary approval for the investment to proceed, the new capital will allow us to deliver on our future strategy providing strong, sustainable returns and growth over the long term,” said Blake.
In fact, Fidelity Life’s Board is recommending shareholders to support the investment. Shareholders, including the Fidelity Family Trust, will vote on changes to Fidelity Life’s constitution needed for the proposal to proceed at the company’s Annual Meeting on 12 December.
Fidelity Life, New Zealand’s largest Kiwi-owned life insurer, is privately held by more than 150 shareholders. Founded in 1973 it has 100,000 customers. The new capital is set to enable the insurer to build digital capability to support innovation, productivity and improved support for customers.
Meanwhile, NZ Super, a NZ$36 billion fund, is a long-term, growth-oriented investor and has returned 10 per cent p.a. since inception in 2003, and currently has around $5 billion invested in NZ, including significant stakes in Kaingaroa Timberlands, Datacom, Kiwibank and Metlifecare.
The Auckland-based fund had posted a return of 20.71 per cent for the year ended June 30, 2017, one of the best annual performances for the sovereign fund largely backed by a sustained rally in global equity markets and the fund’s “active investment strategies,” it had said in its annual report last month.
Independent advisers Simmons Corporate Finance have concluded that the value of the Fidelity Life shares involved in the proposed transaction is in the range of $110-$130 per share and that the total value of the company is between $198 million and $220 million.