Local insurance company Vero has taken a surprise stake in troubled Tower Insurance, which is likely to upset the takeover plans by a Canadian firm.
Vero Insurance has acquired about 11 percent of shares in Tower for $1.30 each.
Paul Smeaton, chief executive of Vero's parent company Suncorp, said his company had lodged interest with Tower in buying the remaining shares at the same price.
"The proposed acquisition would consolidate Suncorp's position in the New Zealand general insurance market, creating a business with gross written premiums of $1.6 billion," he said.
"The combined business would generate significant shareholder value through cost efficiencies, as well as reinsurance and technology synergies," he added.
Tower Insurance chairman Michael Stiassny said it was recommending shareholders did not sell while it reviewed the business.
"The board's primary focus remains to optimise value for our shareholders. In order to do so, we need to review and evaluate all options. We will update the market on any further material developments as the circumstances require.
Earlier this month, Toronto-based Fairfax Financial Holdings offered to buy Tower for $197m to get a foothold in the New Zealand market.
Two of Tower's larger shareholders, including fund manager Salt Funds and the Accident Compensation Corporation, which hold 18 percent between them, have said they would accept that offer.