IAG releases statement in response to failed RAC acquisition
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More news: Shares of Insurance Australia Group (IAG) fell 1.08% to $7.76 as of 2pm AEDT following the Australian Competition and Consumer Commission's (ACCC) decision to oppose the $1.4 billion acquisition of RAC Insurance (RACI), saying that the deal would substantially lessen competition in Western Australia.
IAG has acknowledged the ACCC's decision and now intends to lodge an application for the assessment of the alliance under the new the new mandatory merger control regime, which will take effect on 1 January 2026.
What they said: "As part of the alliance we have committed to staying local, investing in enhancements to the RAC member experience and continuing to deliver high quality and competitive insurance products and services. Together, we would also continue to invest in initiatives that support local communities and provide benefits to RAC, its members and Western Australia," IAG managing director and CEO Nic Hawkins said.
ACCC blocks IAG's $1.4b takeover of RAC Insurance
The news: The Australian Competition & Consumer Commission (ACCC) has opposed IAG's proposed $1.4 billion acquisition of RAC Insurance (RACI), saying that the deal would substantially lessen competition in Western Australia.
The numbers: ACCC said the proposed acquisition would leave IAG with overall market shares of around 55-65% in motor vehicle insurance and 50-60% in home and contents insurance in WA.
The context: The competition regulator outlined preliminary competition concerns in September, following the announcement of the proposal in May.
IAG had offered to pay $400 million to acquire RACI, plus $950 million in a distribution and licensing agreement with its current owner, the Royal Automobile Club of Western Australia.
What they said: "We concluded that the proposed acquisition would eliminate the significant competition between IAG and RACI, and reduce the competitive pressure they each place on rival insurance brands," said ACCC chair Gina Cass-Gottlieb.
"We concluded that the acquisition would be likely to allow IAG, after acquiring RACI, to increase premiums and reduce the quality of its suite of insurance products, with likely flow-on effects to the offerings of other insurers."
The source: ASX
