This Notice provides information regarding the Off-Market Buy-Back by Insurance Australia Group Limited (“IAG”)

This off-market buy-back (Buy-Back) was announced to the market on Friday, 19 August 2016. This Notice provides specific information to participants in relation to the Buy-Back and details the process for submitting a Tender through CHESS. Capitalised words in the Notice have the meaning given to them in Section 5 of the Buy-Back booklet that was announced to ASX by IAG on Friday, 26 August 2016.

Background

Insurance Australia Group Limited (IAG) is targeting a Buy-Back of around $300 million of fully paid ordinary shares in the capital of IAG (Shares). IAG retains the discretion to increase or decrease the size of the Buy-Back.

IAG invites eligible shareholders to Tender Shares at discounts of between 4% and 14% inclusive (at 1% intervals) to the VWAP Market Price.  The VWAP Market Price is calculated as the VWAP of IAG ordinary shares over the five trading days up to and including the Closing Date (Friday, 07 October 2016), as determined by IAG after 4.30pm (Sydney time) on the Closing Date.  The Buy-Back Price will be calculated by applying the Buy-Back Discount selected by IAG to the VWAP Market Price.  Shareholders can specify a Minimum Price (being one of four prices set out on the Tender Form) in conjunction with their Tender Discount(s) and/or Final Price Tender.  If you specify a Minimum Price, this will make your Tender conditional upon the Buy-Back Price being no less than the Minimum Price.

For Australian tax purposes, the Buy-Back Price will comprise a Capital Component and a deemed dividend component. The Australian Taxation Office has indicated that shareholders whose Shares are bought back by IAG under the Buy-Back will receive a Capital Component of A$2.99 per Share with the balance of the Buy-Back Price deemed to be a fully franked dividend for Australian tax purposes^[1]. The Buy-Back will have different tax consequences for each shareholder, depending on their individual taxation circumstances and the Australian income taxation consequences for them.

IAG intends to buy back all Shares Tendered by eligible shareholders who tender their shares as a Final Price Tender or who Tender their shares at a discount greater than or equal to the Buy-Back Discount, subject to any scale back or Minimum Price condition.  A shareholder whose Tender is accepted will be paid the Buy-Back Price for each Share that is bought back.  This will be the case even if they Tender their Shares at a discount greater than the Buy-Back Discount adopted by IAG.  

IAG will not buy back any Shares Tendered by shareholders at a discount smaller than the Buy-Back Discount, or any Shares that are Tendered specifying a Minimum Price that is greater than the Buy-Back Price. 

If the total number of shares Tendered as Final Price Tenders or at a discount greater than or equal to the Buy-Back Discount is greater than the number of Shares IAG determines to repurchase, successful Tenders may be scaled back. However, if there is a scale back, IAG will buy back a Priority Allocation (expected to be the first 850 Shares, or such lesser number of Shares determined by IAG to be the Priority Allocation) successfully Tendered by each shareholder.

Shareholders who hold 850 Shares or less must Tender all of their Shares (at one Tender Discount or as a Final Price Tender) if they wish to participate in the Buy-Back. Shareholders who hold more than 850 Shares may tender any number of Shares they hold (at one or more Tender Discounts or as a Final Price Tender), subject to a minimum of 850 Shares (in aggregate) and a maximum of the number of Shares shown on their Tender Form.

In addition, those who Tender all of their Shares as a Final Price Tender and/or at a discount greater than or equal to the Buy-Back Discount and who would otherwise be left with a Small Holding (expected to be 340, or such lesser number of Shares determined by IAG or less shares) as a result of a scale back, will not have their Tender scaled back and their Tender will be accepted in full. 

^[1] This amount is subject to Australian Taxation Office approval (see Section 2 of the Buy-Back booklet that was announced to ASX by IAG on Friday 26 August 2016).

What do I need to do by when?

CHESS will process acceptance messages received no later than 7.00pm (Sydney time) on Friday, 07 October 2016. An eligible IAG shareholder may only Tender the number of Shares they hold as at the Buy-Back Record Date (Thursday 25 August 2016) that confer an entitlement to participate in the Buy-Back. 

Participants should be aware that IAG shareholders are able to submit Tenders via an online facility offered by IAG.  Tenders submitted via the online facility for a CHESS holding will be actioned by the Registry via Registry Initiated Takeover Request transactions in accordance with CHESS 6.1, and such messages require the participant’s response to either accept or reject the message. 

IAG strongly recommends that shareholders with CHESS Holdings who lodge online Tenders do so by no later than 5.00pm (Sydney time) on the Closing Date.  Participants should also be aware that they may be required to action messages received via this channel up to 7.00pm (Sydney time) on the Closing Date, in order for the Tenders to be validly submitted.  It is expected that this Tender mechanism may result in larger volumes of registry initiated messages than for paper-based submission only, and participants are requested to monitor the requests for response throughout the Buy-Back period, but especially in the last week of the Tender Period.

Any Buy-Back Tender CHESS messages initiated by the Registry which have not been acknowledged by a shareholder’s controlling participant by 7.00pm on the Closing Date will be rejected, and those Tenders will not be included in the Buy-Back.  Neither IAG nor the Registry will be responsible should the controlling participant not acknowledge and confirm a Tender in sufficient time.

Withdrawal Process

A participant may withdraw a Tender by transmission of an EIS type ‘085’ message (Takeover Acceptance Removal Request Message) such that it is received no later than 7.00pm (Sydney time) on Friday, 07 October 2016 (Please refer to Buy-Back booklet for further information). 

Amendment of Tenders

Each parcel of Shares Tendered at one of the specified prices in the Tender Range or as a Final Price Tender, including a Tender made conditional on a Minimum Price, is a separate Tender.

A participant who receives instructions from a Sponsored Holder (i.e. CHESS Holder) to amend the Tender Price and/or Minimum Price for a specific Tender must process the amendment by withdrawing the relevant Tender entirely and replacing it with a new Tender. A participant may withdraw a Tender by transmission of an EIS type ‘085’ message (Takeover Acceptance Removal Request Message) and replace it by transmission of an EIS type ‘031’ message (Takeover Acceptance Message).

Both messages must be received no later than 7.00pm (Sydney time) on Friday, 07 October 2016 in order for the previous Tender to be replaced with the new Tender. If a Sponsored Holder wishes to reduce or increase the number of Shares Tendered at a Tender Price, full withdrawal of the relevant Tender is not required.

Please refer to General Information for further details concerning the processing of Takeover Acceptance Removal Request Messages. 

Small Holding Tenders

A Small Holding Tender is a Tender submitted by an eligible IAG shareholder who has tendered all of their Shares at one of the Tender Discounts greater than or equal to the Buy-Back Discount and/or as a Final Price Tender, and who would otherwise be left with 340 Shares or less as a result of a scale back. No scale back will apply to Small Holding Tenders. 

Shares held by trustees and nominees

Trustees and Nominees must aggregate all Tenders received from beneficial owners who are not Excluded Foreign Shareholders. Any scale back that applies to Shares Tendered will be performed on a registered holder basis.

Payment of proceeds

Proceeds will only be remitted by direct electronic credit to the nominated bank account. Shareholders and Participants should ensure this account held by the Registry is correct.  By submitting a Tender, IAG is authorised to pay any Buy-Back proceeds electronically into the nominated bank account held by the Registry.

Bank accounts can be updated online at www.computershare.com.au/easyupdate/iag or through CHESS before the Closing Date. Any updates to bank account details will be taken to be the nominated bank account details for future IAG dividend payments. 

Payments to bank accounts are expected to occur on Monday, 17 October 2016. Payment to nominated bank accounts will satisfy IAG’s obligation to pay for any Shares bought back.

For further information regarding the offer please contact the Buy-Back Information Line on 1300 640 412 (within Australia) or +61 3 9415 4067 from outside Australia (Monday to Friday betweem 8.30am to 5.00pm Sydney time). 

Need more information?

Issued by

Cheng Zhang, Senior Officer, Post Trade Operations

Contact information

Cheng Zhang
1800 623 571
cad@asx.com.au

General Information

Participants should refer to Section 13 of the CHESS Procedure Guidelines for Participants and Section 14 of the ASX Settlement Operating Rules for further information concerning the processing of Takeover Acceptance Messages & Takeover Acceptance Removal Request Messages for a CHESS holding of securities. Some of these issues are summarised below.

A Participant must submit acceptance of an offer by transmission of an EIS type ‘031’ message (Takeover Acceptance Message) where the securities in Question are held in a CHESS Holding. The Participant will receive a ‘032’ message (Effected Takeover Acceptance Message) from CHESS in response.

In addition to the electronic notification to the Participant, paper notification will be sent directly to the Holder as securities are reserved in an offer-accepted subposition. Any change to the balance of securities in the subposition will generate further electronic notification to the Participant and paper notification to the Holder.  

Where a Participant receives instructions from a Sponsored Holder, the Participant is required under the ASX Settlement Operating Rules to submit an acceptance as follows:

If the Holder specifies the time when or by which the offer must be submitted, in accordance with those instructions; otherwise by End of Day on the date of receipt of instructions from the Holder, where the offer closes on the date of receipt of instructions then prior to the close of the offer.

Participants should therefore retain, as a minimum, a record of the date on which instructions to accept an offer is received from a Sponsored Holder.

If Securities in a CHESS holding have been reserved by ASX in an offer accepted subposition, a release of the Securities from that subposition may be initiated by a Valid Originating Message if the Holder of the Securities to which the Tender relates is legally entitled.

A Participant must initiate removal of a Takeover Acceptance Message by transmission of an EIS type ‘085’ message (Takeover Removal Request Message) where the securities in Question are held in a CHESS Holding. The Participant will receive a ‘086’ message (Acceptance Removal Request Message) from CHESS in response.    

In addition to the electronic notification to the Participant, paper notification will be sent directly to the Holder as securities have been removed from an offer-accepted subposition. Any change to the balance of securities in the subposition will generate further electronic advice to the Participant and paper advice to the Holder.

Participants should therefore retain, as a minimum, a record of the date on which instructions to withdraw Securities are received from a Sponsored Holder.

Disclaimer