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Zurich seeks to expand its travel insurance business

December 13, 2016 Insurance No Comments Email Email

Zurich Financial Services Australia Limited announced today that its holding company, Zurich Insurance Company Ltd (Zurich), has entered into a Scheme Implementation Agreement (SIA) with Cover-More Group Limited (Cover-More) to acquire Cover-More, an ASX listed provider of travel insurance and assistance solutions with a No.1 market position in Australia and New Zealand and among the market leaders in India and the US, via a scheme of arrangement (Scheme). This transaction represents an important step by Zurich to expand its existing portfolio of products and services and to become a top 3 global travel insurance provider.

The Board of Directors of Cover-More has unanimously recommended that its shareholders vote in favor of the Scheme (in the absence of a superior proposal and subject to the independent expert concluding that the Scheme is in the best interests of Cover-More shareholders).

Under the transaction, Zurich will acquire 100% of the issued share capital of Cover-More for AUD 1.95 cash per share, with the scheme consideration valuing Cover-More’s fully diluted1 equity at approximately AUD 741 million (USD 554 million) 2 . The final cash consideration payable to Cover-More shareholders under the Scheme will be reduced by the amount of any interim dividend or special dividend which is announced, declared, or paid by Cover-More prior to the end date of 30 June 2017.

The implementation of the Scheme is subject to fulfilment of a number of customary conditions including FIRB approval, approval under the Hart-Scott-Rodino Antitrust Improvements Act 1976, approval under the Financial Services and Markets Act (2000) (UK), customary shareholder and court approvals and there being no prescribed occurrences in relation to Cover-More. The SIA also contains customary exclusivity provisions, including no-shop, no-talk, no due diligence and notification provisions as well as a matching right, with a break fee of 1% of the scheme consideration being payable by either Cover-More or Zurich depending upon the circumstances. The SIA is attached as an annexure to this announcement. Both parties are working towards implementing the Scheme no later than in the second quarter of 2017.

Travel insurance is a fast-growing industry, providing a high-margin, capital-light product with low volatility. The proposed acquisition of Cover-More fits Zurich’s aspiration to develop a distinct position in the global travel insurance market. Cover-More represents a unique opportunity for Zurich to acquire a globally expanding platform, deployable across Zurich’s footprint.

“The proposed acquisition is an excellent fit with Zurich’s strategy for its retail business and should create significant value for the Group. It will further strengthen our position and expertise in the global travel insurance market and support our ambition to expand our distribution partnerships. Through Cover-More’s technology platform, Zurich will be able to attract and serve the needs of retail customers in the growing travel insurance market,” said Jack Howell, Zurich’s Chief Executive Officer of Asia Pacific. “We look forward to welcoming Cover-More into the Zurich Group.”

Rajbir Nanra, Chief Executive Officer of Zurich’s property and casualty business in Australia and New Zealand added: “The proposed acquisition of Cover-More, which operates globally and is based in Sydney, will see Zurich further strengthening its position and demonstrates its commitment to the Australian market. This acquisition will open up opportunities to explore how we can collaborate with Cover-More to support our local plans in Australia to diversify our product and distribution offering, while staying true to our intermediated broker focus.”

It is proposed that, under Zurich ownership, Cover-More will continue to operate as a standalone entity and will retain its brand.

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