Dai-ichi buyout compelling, says Tower

Mr Thomas said the buyout would give Tower the firepower to take advantage of the fast-growing life insurance industry.

"Growth requires a significant amount of working capital," he said.

"We need to keep abreast of technology and service delivery, and that is expensive."

Mr Thomas also noted that the industry faced uncertainty, with regulators planning tougher rules surrounding capital.

In offering to buy the remaining 71 per cent of Tower, Dai-ichi has pledged to keep the Australian insurer's local board and management, including the chief executive and managing director, Jim Minto. It is expected Dai-ichi will continue its hunt for other wealth management acquisitions.

Mr Minto said Tower was performing "as one would expect" in what has been a reasonably strong market.

Figures released by the Australian Prudential Regulation Authority yesterday showed life insurance sales were up 0.7 per cent in the year to end-September to $41.3 billion.

Dai-ichi's offer of $4 cash per share is a 46 per cent premium to Tower's average trading price over the past month. Tower closed up 2? at $3.90 yesterday.

The shares had been under pressure due to uncertainty over how much capital would need to be pumped into the business to meet tough new rules designed to strengthen the financial system.

Mr Thomas said if a higher offer emerged for the life insurer, Tower would assess whether it was in the best interests of shareholders.

Dai-ichi bought its initial stake in Tower two years ago for about $376 million.