It has been a rough week for insurance M&A in the region, with the collapse of two significant deals.
The sale of Australian brokerage Coverforce for up to A$200 million (US$140 million) ended in farce after AUB pulled out of the acquisition just one day before a judge gave it the go-ahead.
AUB terminated the conditional sale agreement with private equity firm Pemba Capital on Monday, saying that it had not received any of the documents it needed to perform due diligence on Coverforce, providing a short-lived victory for Coverforce chief executive Jim Angelis, who had been arguing for months that Pemba had no right to pursue the sale.
But on Tuesday (December 10), a court in New South Wales found that Angelis was indeed obliged to provide the due diligence materials and that there was nothing stopping Pemba from selling Coverforce to AUB. Alas, it was too late.
There are few heroes in the whole sorry mess, with the judge criticising both Angelis and Pemba for their actions during the process.
According to the judgment, the problems started with Angelis’s attempted acquisition of Resilium from Suncorp, by way of a management buyout, late in 2018.
Australia’s investigation into misconduct in the banking, superannuation and financial services industry had prompted Suncorp to contemplate the sale of Resilium “given the risks associated with Suncorp continuing to own a vertically integrated general insurance broking business”, according to a Suncorp document presented in court.
In court, Mark Summerhayes, managing director of Pemba, said that the drag right was only to be used on a “cold day in hell — like today”.
Angelis therefore pursued a deal with Resilium with the independence he had become accustomed to. But there was a sticking point. Although Pemba only held a minority 49% stake in the company, it had a right to compel all the other shareholders into a sale if it wanted to. Both Resilium and Suncorp saw Pemba’s so-called drag right as a dealbreaker.
What followed was a contentious breakdown of communications among the Coverforce board, resulting in Angelis unilaterally scrapping the drag right and concluding a deal with Resilium without proper consent from Pemba, which in turn led Pemba to pursue a sale of the entire company to AUB in July this year.
In court, Mark Summerhayes, managing director of Pemba, said that the drag right was only to be used on a “cold day in hell — like today”.
It remains to be seen if Angelis will end up back in control of his “family business” again. An independent expert has been appointed to assess the value of the Coverforce shares and any damages that may be due to Pemba. Meanwhile, Resilium has accused both sides of misleading conduct, which the court agreed with, and may be entitled to a settlement of its own.
All in all, nobody is likely to walk away from the situation happy.
RHB/Tokio MarineIn Malaysia, a less dramatic turn of events led to the collapse of Tokio Marine’s long-standing attempt to buy RHB Bank’s insurance unit.
Rumours of a deal started in 2016 and Malaysia’s central bank officially approved talks to sell the 94.7% stake in July this year, which gave a six-month window to negotiate the deal. The bank’s group managing director, Khariussaleg Ramli, said in August that the group was aiming to complete the deal by the end of the first quarter of 2020. But the two sides failed to seal the deal.
The deal would have given Tokio Marine a significant footprint in Malaysia.
“RHB Bank wishes to announce that after much negotiations and deliberations, both the company and [Tokio Marine] have not been able to reach an agreement on mutually acceptable terms and conditions for the proposed disposal,” said RHB in a statement to the stock exchange. “Accordingly, RHB Bank and [Tokio Marine] have mutually agreed to cease negotiations, and will not proceed.”
The deal would have given Tokio Marine a significant footprint in Malaysia. The RHB unit is Malaysia’s 10th biggest general insurer with a 4.4% market share, according to its annual report. It has a book value of about M$580 million (US$140 million) and the rumoured deal value was around US$500 million.
It would have been the first significant acquisition in the country since the government announced its intention to enforce a 70% foreign ownership cap last year.
Whatever the obstacle was for Tokio Marine, RHB must be hoping that it can find another buyer that will be willing to pay the asking price. Only time will tell if that is a sensible expectation.

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