By Rajasik Mukherjee

(Reuters) -Shares of Australia's Insignia Financial hit a more than three-year high on Monday as a bidding war escalated, with private equity firm Bain Capital raising its offer to A$2.87 billion ($1.76 billion), in line with rival CC Capital's bid.

Under the offer, Insignia shareholders will receive A$4.30 per share, a 7.5% premium to Bain Capital's earlier offer and a 4.4% premium to Insignia's last closing price of A$4.120.

Shares of the 178-year-old Australian wealth manager, which provides superannuation, financial advice and asset management services, gained as much as 3.2% to A$4.250, hitting their highest levels since Oct. 28, 2021.

Last week, U.S.-based investment manager CC Capital Partners offered to buy Insignia for A$2.87 billion, days after the Australian company rejected Bain Capital's initial takeover bid, citing it did not provide fair value to shareholders.

"I see the bidding war is in early days and we will likely see CC Capital respond to Bain's increased bid in the near future ... It's going to be a very tight race," said Grady Wulff, market analyst at online share trade platform Bell Direct.

CC Capital did not immediately respond to a request for comment.

Bain's counter offer has escalated 2025's first bidding war for an Australian firm. Last year was an intensely busy year for the Australian dealmakers as M&A activity was worth $113.4 billion in 2024, according to LSEG data, up 15% from 2023 levels.

The Australian wealth manager said that under the revised offer, Bain Capital would also allow Insignia shareholders an option to receive part of the total purchase price as scrip in the new entity.

Bain Capital's revised offer reflects a strong sense of investor appetite for Australia-listed wealth managers whose asset bases have grown strongly.

The deal would give access to Australia's A$4.1 trillion superannuation system, which is considered one of the world's largest private pension markets.

($1 = 1.6279 Australian dollars)