Broking house downgrades Tower

Merrill Lynch downgraded mid-sized New Zealand insurer Tower to a "sell" from "hold", saying a planned demerger of its Australian unit would reduce earnings and the chances of a takeover had diminished.

The US broking house cut its forecast of Tower's future earnings per share by an average of 11 per cent as a result of what it called a "strategically short-sighted" plan to split off the Australian assets into a separate listed entity that "provides no value to most shareholders in our view unless it enhances takeover appeal", reports analyst Andrew Kearnan.