Challenger rejects $7.8bn takeover offer

Challenger's board has rejected a proposed $7.8 billion takeover by TAL Daiichi Life Australia, saying the $11.80 per share offer falls short of a level it could recommend to shareholders.

The annuities provider said directors had assessed the non-binding proposal against the company's value and prospects, concluding the price was insufficient.

"The board has concluded the offer is not at a level it could recommend to shareholders," Challenger said.

TAL, Challenger's largest shareholder and a commercial partner, proposed acquiring the remaining 79.5% of ordinary shares it does not already own through a scheme of arrangement.

Challenger said it intended to engage with TAL to determine whether a revised proposal could be reached that the board would support.

However, it cautioned that discussions might not result in a binding offer or any transaction.

The update follows TAL's initial proposal on October 19, which coincided with Challenger reporting stronger sales momentum in the opening quarter of FY27.

Total sales rose 52% year on year to $4.4 billion in the September quarter, while assets under management increased 5% to $31.9 billion.

Net annuity flows reached $1.1 billion, with annuity sales climbing 72% to $2.8 billion.

Fixed-term annuity sales more than doubled to $2.2 billion, supported by demand for longer-dated products and the launch of Challenger's annuity-backed notes fund program.

Managing director and chief executive Nick Hamilton previously attributed the performance to demand for guaranteed retirement income, broader distribution and the execution of the company's growth strategy.

The company is also progressing plans to merge investment management businesses Fidante and Channel Capital, a move expected to create a larger investment management platform and leave Challenger more focused on retirement income.

The Australian Competition and Consumer Commission (ACCC) recently approved the merger of Fidante and Channel Capital.

The board's latest response leaves the door open to further negotiations with TAL, but no revised offer or transaction has been agreed to.