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The Australian Competition & Consumer Commission (ACCC) has announced today it will not oppose the $72 million acquisition of comparison website iSelect (ASX: ISU) by Innovation Holdings Australia (IHA), which operates online rival Compare the Market.
IHA currently owns around a 26 per cent stake in iSelect – acquired through a series of buy-outs starting in 2018 - and announced its intention to purchase the remaining shares four months ago.
While the ACCC heard concerns from some market participants that Compare the Market and iSelect closely compete, it determined it was unlikely the takeover would substantially lessen competition in the sector.
Shares in iSelect have jumped 9 per cent to 25cps at the time of writing.
“One of the major factors for this view is that only a small minority of consumers buy insurance, energy, and financial products through Compare the Market and iSelect,” the ACCC said.
“Most consumers purchase these products through other distribution channels such as brokers or direct from the retailer.”
IHA is an investment of South Africa-based Reef Investment Consortium, a syndicate of private investors focused on strategic assets in the insurance sector. Founded in 1975, Reef operates insurance and online comparison-related companies in South Africa, the UK, Australia, Turkey, France, Singapore, China and Thailand.
Reef’s investments include Auto & General, a Brisbane-based company that underwrites and distributes home, motor and travel insurance in Australia under the brand Budget Direct.
The buy-out of iSelect will see IHA take control of two websites: www.iselect.com.au and www.energywatch.com.au, which compare a range of plans and policies including different types of insurance, energy, and financial products and services.
On 10 August, the iSelect board unanimously agreed to sell the insurance and utility comparison service for 30 cents a share, reflecting an 87.5 per cent premium to closing price from the day before.
“The directors of iSelect unanimously recommend that shareholders vote in favour of the scheme, subject to there being no superior proposal and the independent expert concluding that the scheme is in the best interests of iSelect shareholders,” iSelect Chairman Brodie Arnhold said to shareholders in August.
“The scheme provides an opportunity for shareholders to realise a significant premium to market value for their shares and provides the certainty of an all-cash offer.”
The ACCC noted that following the proposed acquisition, Compare the Market and iSelect would continue to face significant competition from other comparison sites, and retailers using alternative means to attract consumers.
“The online comparison services industry is very dynamic and so the threat of new entry or expansion by a competitor is likely to constrain the merged firm,” ACCC commissioner Liza Carver said.
“Consumers can readily purchase insurance, financial and energy products directly from the supplier, and shop around using multiple competing comparator sites including government comparison websites.”
In April 2021, the ACCC previously considered a partial acquisition which would have resulted in IHA holding up to 35 per cent shares of iSelect.
While the ACCC announced that it would not oppose Compare the Market’s increasing stake in iSelect, the deal did not go ahead.
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