The Commerce Commission has extended the deadline for its decision on whether to clear Insurance Australia Group's planned acquisition of rival insurer Lumley for the third time.
The extension this time is, however, for just one week, until Wednesday, May 7. The decision had been due today.
In a statement IAG says it has agreed to a request from the Commerce Commission for the additional extension, and that it still expects the deal to go through by June 30.
Mike Wilkins, IAG’s managing director and CEO, said it was understandable a major acquisition of this type was attracting careful consideration.
"It remains IAG’s expectation that the transaction will be completed by 30 June 2014," Wilkins said.
There's no set time limit by when the Commerce Commission must make a ruling. In its Mergers and Acquisitions Guidelines the Commission says decision that take more than 40 working days, which this one has, may involve the consideration of divestments that have been offered; the testing of new information provided by the applicant or market participants (including economic evidence); and/or give the applicant the chance to fully respond to unresolved issues.
The deal also requires the approval of the Reserve Bank of New Zealand. The Overseas Investment Office approved it on March 6.
In New Zealand IAG 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.
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 Commerce Commission's initial deadline for its decision was January 24. This was extended until March 28, and then April 30.
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.
In Australia the deal still requires the approval of the Australian Prudential Regulation Authority and the Federal Treasurer. It has been cleared by the Australian Competition and Consumer Commission.