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Guinness Peat Group will not reveal how much profit it will make on the sale of its 29.7 per cent stake in Tower Australia, but one analyst reckons it is at least A$186 million ($237 million).
GPG yesterday announced it had conditionally agreed to sell its shareholding to Japanese life insurance firm Dai-ichi Mutual Life Assurance for A$3.75 a share, a total of A$376 million in cash.
The transaction has been split into three with 14.9 per cent sold unconditionally, a further 5 per cent requiring approval from the Australian regulatory authorities and a final tranche of 9.8 per cent requiring regulatory and shareholder approval because it takes Dai-ichi's shareholding over the 19.9 per cent threshold from which companies can make a takeover bid.
Tower Australia chief executive Jim Minto said GPG had made it very clear to the board that it was approached by Dai-ichi and had not been looking to sell its stake.
"[It was] happy to hold Tower. But the offer came out of the blue."
He said the first Tower knew of the sale was when GPG told its independent directors, who then had to satisfy themselves that Dai-ichi was not interested in taking over the company.
Once they had decided to let GPG sell its entire stake, it was then left up to GPG to negotiate the price.
GPG first bought into Tower five years ago when Australia was a subsidiary of the New Zealand company.
It then helped to split off the Australian Wealth Management business in 2005 and in November 2006 separated the Australian and New Zealand businesses completely.
GPG New Zealand boss Tony Gibbs said the Australian business had got to a point where it was good time for GPG to exit it.
"Tower Australia is very much a company in growth phase. It's a very good business but has got to the point where we don't have much more to add to it. Dai-ichi certainly does. It has now got a very responsible parent. It will be good for Tower Australia."
He would not reveal how much profit GPG had made on the deal but said GPG had done very well out of both this sale and that of the Australian Wealth Management business.
Last year GPG sold its 19.2 per cent stake in AWM to institutional investors for A$267 million, booking a profit of A$172 million.
But it seems profits from the sale of the Australian business may be even higher.
In a research note, Citigroup analyst Amy Carroll put the profit at A$186 million, working off the value of GPG's investment since the Australian company was split off, and described it as a timely sale.
"Given the recent strength in Tower Australia's share price against a tough economic backdrop, GPG's sale price of more than a 30 per cent premium to Tower Australia's previous 30-day VWAP is a timely sale at a good price."
Gibbs said the profit would be added to the cash already on its balance sheets.
"GPG has always got good cash on its balance sheets. But in these markets any more cash is welcome to have."
He said GPG had no further plans to split off any other part of Tower New Zealand, in which it recently increased its stake to 35 per cent, and it was "not hanging out the for sale sign on the business".
GPG closed up 9c at $1.55 while Tower Australia closed up A14c at A$2.93.
CASHED UP
GPG has sold its 29.7 per cent stake in Tower Australia for A$376 million.
Last year it sold a 19.2 per cent stake in Tower's former Australian Wealth Management arm for A$267 million. It made a profit of A$172 million.
The profit for Tower Australia is thought to be even higher at A$186 million.
