$350m share issue for Tower listing

By Richard Braddell

WELLINGTON - Tower Corporation is heading for a September 28 listing on New Zealand and Australian stock exchanges after unveiling a prospectus that includes a $350 million issue of new shares.

But although Tower has lowered the indicative price range to $5.80-$6.80 a share from the $6-$8 range in its April demutualisation information memorandum, demand is likely to be good.

This is based on firm broker allocations worth $75 million, preferential member, staff and customer entitlements and requests already from 90,000 of Tower's 400,000 non-member customers for an investment statement.

The indicative price, which was determined in consultation with investment bankers and through "pre-marketing" with institutions, will be finalised through an institutional book-building process.

Describing Tower as a growth stock, managing director James Boonzaier said the group had expanded from assets of $2 billion in 1990 to $13 billion.

Listing would provide access to equity capital necessary for continued expansion.

Although Tower was busy digesting its $A195 million ($235 million) takeover of Australia's FAI Life, he said smaller acquisitions were possible soon.

"I believe that Tower shares are an excellent investment because Tower has had a profit culture unlike many other mutuals since the early 90s," Mr Boonzaier said.

Productivity had been monitored closely and profit was underpinned by operational earnings rather than volatile investment profits that, at between 30 per cent and 35 per cent of the total, formed a lower proportion than many of Tower's competitors.

Tower is forecasting a $70.6 million net profit for the year ending September 30, rising to $74.2 million in 2000.

Dividends between 40 per cent and 60 per cent of profit are planned, with an initial dividend of 11.18c a share anticipated next April.

Shareholders' funds are forecast at just short of $800 million, while Tower would lift debt from $245 million now to $465 million.

The listing, after 130 years as a mutual, will result in the disappearance of the legal entity Tower Corporation. This will be replaced by Tower, which will own a holding firm, Tower Financial Services Group, which in turn will own operating subsidiaries.