Tower shareholders approve AWM spinoff

Financial services company Tower Group Ltd's shareholders today approved the spinoff of its Australian Wealth Management (AWM) business at a meeting in Wellington.

Tower's AWM largely consists of two businesses -- Bridges and Tower Trust. Bridges offers master trust, financial planning and stock broking services, while Tower Trust offers trustee and funds management services to financial advisers and corporates.

The deal approved today by shareholders sells AWM to Tower's existing shareholders for $250 million and in the process raises $130 million to be paid to Tower to fund its statutory reserves and new growth.

Tower's shareholders will be allocated a certain number of shares in AWM proportionate to their shares in Tower and entitlements to buy more. The AWM shares are worth $120 million.

If Tower shareholders want more AWM shares, they will have to pay A80 cents a share through a rights issue.

Shareholders also today approved Guinness Peat Group's (GPG) underwriting of that $130 million rights issue.

Analysts say GPG, which currently holds 19.9 per cent of Tower, would end up with up to 40 per cent of AWM because thousands of small Kiwi shareholders in Tower were unlikely to subscribe for more AWM shares.

In November last year Tower reported a September year net profit of $54.6 million, rebounding from last year's $149m loss. AWM's net profit rose to $15m from $10.2m.

Tower shares were 4c higher at $2.25 in early afternoon trade.

- NZPA