11th-hour GPG coup secures Tower deal

By PAULA OLIVER

A dramatic day for Tower culminated in a stunning announcement last night that its board will proceed with a recapitalisation backed by corporate raider Guinness Peat Group.

GPG has been fighting all week to underwrite Tower's rescue package and late yesterday its battle looked dead.

But renowned corporate fighter Tony Gibbs proved he should never be written off - pulling a surprise late move that secured the underwrite ahead of his opponents.

The Tower board's decision shuts out a group of rival shareholders who had over the past two weeks cobbled together their own rescue plan led by First NZ Capital.

One of them, Hanover Group, vowed last night to fight the latest decision in whatever way it could.

"This is reprehensible behaviour. It shouldn't be allowed to go on," Hanover chief executive Kerry Finnigan fired. "All day Tower has been saying that GPG had no influence over them. Well guess what - look at this now."

Finnigan said Tower's board must have known about the proposal when it held its special meeting yesterday morning.

"At the meeting they said there was no other offer on the table. But we have heard that this deal was worked up and talked about for more than two or three hours."

The decision came as a surprise because it appears that very few people knew of the existence of the new proposal.

It is likely, however, that some of the supporters behind the First NZ Capital deal switched camps and will soon be shown to be backing up GPG's offer.

That deal will see GPG underwrite Tower's $210 million capital raising in almost identical terms to the First NZ Capital deal.

A four for three pro rata rights issue at 90c, the deal is fully underwritten by GPG with a strong panel of sub-underwriters.

The clinching factor is that GPG is restricted to retaining no more than 15.6 million shares through the underwrite - meaning it will not go above a total stake in Tower of 13.75 per cent.

That allows it to avoid the scrutiny of the stock exchange's Market Surveillance Panel, which late yesterday appeared to have put the final nail in the coffin of GPG's fight.

The panel ruled against an appeal from GPG to allow it to underwrite Tower's recapitalisation without first gaining shareholder approval.

That decision was based on the possibility that GPG could win as much as 20 per cent of Tower, and materially increase its control over the company.

The GPG deal revealed last night does not trouble that ruling.

Gibbs, who spoke to the Business Herald last night as he was driving home to Matakana, said he would be seeking a judicial review of the NZX decision in the High Court.

It is possible that the 13.75 per cent limit on GPG's Tower stake in the new deal could disappear if that court action is successful.

Another positive factor in the deal for GPG is that it will hold on to any shares left over from the underwrite that would take it over that limit.

It will be allowed six months to sell the shares down, effectively allowing it to shut out some players for a period of time.

Gibbs said he was very pleased with the outcome.

He said the Tower board did not know of the offer until after the special meeting.

"We were hopeful that the regulator would grant us the waiver. But in the back of our minds we had this. When we learned that the regulator had declined the waiver yet again, we moved."

Gibbs said Tower's chairman had been present when the offer was made and had been involved in the decision before he flew home to Melbourne at 3.50pm.

He said he would not be asking Hanover Group to be a sub-underwriter.

In a statement Tower's board said that the GPG offer represented the best option for the company.

Group managing director Keith Taylor did not return calls last night.

Chairman Olaf O'Duill was scheduled to be on a flight when the announcement was made.

Their decision ends what has been a tumultuous week for the financially troubled company.

Battles between warring shareholder factions have taken more twists and turns than a contortionist's intestine - and just when it all appeared to be coming to an end GPG played its trump card.

Yesterday's drama began with a feisty special meeting of Tower shareholders at the Michael Fowler Centre on a crisp Wellington day.

In the scheme of things the meeting did not end up meaning a lot.

Steely glares and confusion punctuated it, but few knew what was going to unfold later in the day.

The only item on the agenda was a vote on the removal of Tower's 10 per cent shareholder cap - a vote that passed by 82 per cent to 18 per cent.

The meeting still delivered the fireworks, humour and strong words that were expected when Tower's oposing shareholders met face-to-face in the Renouf Foyer.

Tower's chairman kicked off proceedings with a reminder to the audience to wait for a microphone before they began to ask a question.

"Then we can appropriately deal with whatever comes out," O'Duill said carefully.

What came out were attacks on Tower's board, questions over the intentions of GPG, and demands that Gibbs give up his fight for a big slice of the company or risk a vote of no confidence.

O'Duill vigorously defended himself, his board, and its GPG directors.

Responding to an attack from Shareholders' Association chairman Bruce Sheppard he fired:

"You have alleged that the GPG directors have control of this company as a 10 per cent shareholder with two board members. If that weren't so laughable I would take serious umbrage at that suggestion because it denigrates the ability and the independence of the remainder of this board."

Sheppard, who flew to Wellington with a viking helmet under his arm in honour of the ancestry of O'Duill, had earlier risen to give his views wearing the horned headwear.

He said that he believed he had enough votes to stop the shareholder cap being removed.

That turned out to be incorrect, because major institutional holders who had indicated they would vote Sheppard's way did not.

Sheppard urged Gibbs to back away from his fight to underwrite Tower's recapitalisation, and told him to "pull his horns in".

"Show some, shall we say, humility, Mr Gibbs. Accept that it's over. Get on with being a shareholder. Get on with being a director. Allow a control premium to emerge in a fair and open contest."

Gibbs, who sat stony-faced through the first half of the 90 minute meeting, made it clear he did not intend to back down.

He then appeared to relax in the face of numerous attacks, and when news arrived that shareholders had voted to remove the 10 per cent cap, Gibbs clapped and shot a steely glare in the direction of Sheppard.

Gibbs later told reporters that he had found the personal attacks insulting to both him and GPG.

"They were unwarranted. Quite frankly he [Sheppard] dresses like a clown, and he acts like one."

Hanover chief executive Kerry Finnigan was sitting next to Sheppard.

Hanover had been a driving force behind the alternative capital raising offer that killed GPG's original Tower plan, but suspicions had been raised over its intentions.

Finnigan sought to assure shareholders that Hanover was in Tower for the long-term and then attacked GPG's intentions.

"GPG appeared to be attempting to thwart us at every turn," he said. "Hanover Group believes GPG should not secure control of Tower because its intentions are not in the best long-term interests of ordinary shareholders."

Other smaller shareholders questioned Tower's financial performance and asked how it got into such a perilous situation.

O'Duill replied that business had been encouraging in April and May, but there was a slow grind ahead.

He noted that Tower was not the only company in its sector that had struggled over the past two years.

But he was happy that from a position of being regarded as a "no-hope entity, we now have two organisations wishing to underwrite the capital raising".

O'Duill ended the meeting shortly after an unsuccessful attempt by Sheppard to move a motion of no confidence in Gibbs.

The relieved chairman followed Tower's disparate shareholders out toward the sandwiches and coffee.

Did he enjoy the day?

"No."

Looking forward to the flight back to Melbourne?

"I just want a cocoon of silence," he said with a wry grin.

Perhaps he knew of the storm that lay ahead.