Dai-ichi Life Group has proposed acquiring all shares of Australian retirement-income provider Challenger. The proposal is worth approximately US$4.4 billion and is aimed at making Challenger's retirement-income business a wholly owned subsidiary.
Dai-ichi Life Group has proposed acquiring all shares of Challenger through TAL Dai-ichi Life Australia under a scheme of arrangement as a friendly Australian acquisition. The offer price is A$11.80 per share, 17.7% above Challenger's recent volume-weighted average price. The implied enterprise value is approximately A$7.94 billion (about US$5.53 billion). Bloomberg estimates that acquiring Dai-ichi Life's remaining 79.5% stake would require approximately US$4.4 billion.
The proposal signals Dai-ichi Life's intention to further expand Challenger's retirement-income business, and Challenger's board is considering it. Challenger provides products that convert retirement savings into monthly income, and a plan to integrate its Fidante business into Channel Capital is also under way.
Dai-ichi Life has already expanded its Australian holdings through TAL. Adding Challenger would allow it to capture a large share of Australia's demand for retirement funding. The move is positioned as part of a strategy to pursue growth overseas against a backdrop of increasing longevity and a low-interest-rate environment in Japan.
The next steps will require completion of due diligence, regulatory approvals and the support of Challenger's board, followed by execution of the scheme implementation deed, a shareholder vote and court approval. As with last year's small investment, approval from the Foreign Investment Review Board and APRA is also expected to be required.