By Gareth Vaughan
The Commerce Commission has, for the second time, extended the deadline for its decision on whether to clear IAG's planned takeover of rival insurer Lumley.
Whilst in itself this isn't necessarily bad news for IAG, it does suggest the consumer watchdog is considering divestments offered by IAG, mulling information brought to its attention late in the piece, or providing interested parties with more time to respond to unresolved issues.
After setting an initial deadline for its decision of January 24, the Commerce Commission unsurprisingly extended this until this Friday, March 28 . However, the deadline has now been pushed out further, until Wednesday April 30.
In its Mergers and Acquisitions Guidelines the Commission says it has "committed" to deciding clearance applications within an average of 40 working days of registering the application. IAG's application was registered on December 20. The Commission says the exact time taken to reach a decision varies depending on the merger under consideration.
"More straightforward clearance applications may take less than 40 working days. More complex clearance applications may take longer and the process is likely to continue beyond 40 working days".
There is no set limit.
"We try and give the most accurate timeline we can at an early stage. However, we may have to seek further extensions later in the process, particularly where we need to: consider divestments that have been offered; test new information provided by the applicant or market participants (including economic evidence); and/or provide an applicant with the opportunity to fully respond to any unresolved issues," the Commission says.
Asked about the Commission's second extension, an IAG NZ spokesman told interest.co.nz extensions are a common part of the regulatory review process for large transactions.
"We continue to work closely with the NZ Commerce Commission to obtain the approvals required for completion of this transaction," the IAG spokesman says.
The Commerce Commission approved IAG's takeover of earthquake-hit rival AMI on March 1, 2012, some two and a half months after that deal was announced on December 16, 2011.
In New Zealand IAG, or Insurance Australia Group, already owns NZI, AMI and State Insurance. In December it announced a A$1.845 billion deal to buy the underwriting businesses of Australia's Wesfarmers, which includes Lumley General Insurance in New Zealand.
The deal would increase IAG's share of the overall New Zealand insurance market to about 50.5% from 41.5%, lift its share of the home and contents and vehicle insurance market to 66% from 60%, and give it 40% of New Zealand's intermediated insurance market.
IAG will sell assets if it has to
In a December interview with interest.co.nz IAG's New Zealand CEO Jacki Johnson said IAG would sell assets to gain Commerce Commission approval for the Lumley purchase if it had to, but IAG sees itself as the natural owner of the assets.
The proposed IAG-Lumley tie up has struck opposition from rivals such as Suncorp and Tower, the Insurance Brokers Association of New Zealand, and the Motor Trade Association who argue it would substantially lessen competition.
However, in its full application to the Commission, IAG says the Lumley acquisition wouldn't result in a substantial lessening of competition in any insurance market. Its application paints a picture of a fiercely competitive insurance market with rivals potentially expanding or entering the market, and banks likely to begin underwriting general insurance themselves.
Aside from the Commerce Commission, in New Zealand the deal also requires approval from the insurance sector's prudential regulator the Reserve Bank, and the Overseas Investment Office. The approval of the Australian Competition and Consumer Commission (ACCC) is also required, with something expected to be announced this Thursday. However, what the ACCC says this week could vary from granting consent to a statement of issues signalling further consideration of specific areas.
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