Suncorp has entered a battle with Canada’s Fairfax Financial Holdings to buy New Zealand insurer Tower, after last week acquiring an 11.14% stake in the company.

As insuranceNEWS.com.au reported in a Breaking News bulletin last Wednesday, the group’s Vero subsidiary is offering $NZ1.30 ($1.22) per share for Tower, valuing the largest New Zealand-owned insurer at $NZ219 million ($205.17 million).

The offer tops a $NZ197 million  ($184 million) bid for Tower earlier this month from Fairfax.

Suncorp New Zealand CEO Paul Smeaton says the proposed deal provides an opportunity to strengthen the company’s strategic position in the highly competitive New Zealand insurance market, creating a business with gross written premium of $NZ1.6 billion ($1.5 billion).

“The combined business would generate significant shareholder value through cost efficiencies, as well as reinsurance and technology synergies.”

Suncorp says it has bought 11.14% of Tower and is “standing in the market” to acquire up to 19.9%.

A “non-binding indicative” proposal has been submitted to the Tower board outlining Suncorp’s interest in acquiring the remaining 88.86% of the company.

“Tower and its advisers are considering the Suncorp proposal and working through obligations with respect to the scheme implementation agreement with Fairfax Financial Holdings,” Tower said in a statement.

The Tower board, which has appointed Northington Partners to prepare an independent report on the proposed deal, has advised shareholders not to take any action “without carefully assessing all available information and seeking their own professional advice”.

IAG CEO Peter Harmer last week said Suncorp is a “responsible competitor” and raised no concerns regarding the rival group’s potential acquisition of Tower.

“We think that would be very stabilising and a vote of confidence in the New Zealand market,” he said during a financial results media briefing.

Tower started business in 1869 as a government department selling life insurance policies and pensions before diversifying and becoming a publicly listed company.

The shares closed at $NZ1.325 ($1.241) in New Zealand on Friday.