Tide turns on GPG's Tower plan

By PAULA OLIVER

Guinness Peat Group's fight for control of Tower looked all but over last night after the stock exchange dealt it a deadly blow.

The NZX refused to allow GPG to underwrite Tower's alternative capital raising without first gaining shareholder approval.

Its decision means that Tower's $210 million rights issue is likely to be underwritten by First NZ Capital and a host of other parties - and that GPG will not get a big slice of the action.

GPG had been battling for days to underwrite the pro rata rights issue, which could have allowed it to increase its stake beyond its 9.9 per cent holding.

That would have been a consolation prize after GPG's recapitalisation scheme, which would have given it at least 30 per cent of Tower, lost out.

But GPG had a safety net - a pre emptive clause that allowed it to underwrite any alternative proposal.

When it became clear on Tuesday that Tower's board had scrapped GPG's proposal in favour of the alternative offer, GPG decided to exercise that right.

But yesterday it hit a big hurdle in its attempt to do so.

GPG needed the permission of the NZX's Market Surveillance Panel to underwrite the rights issue without shareholder approval.

That permission was denied.

Tower is in desperate need of the cash injection to repay debt due on August 8, and NZX listing rules meant GPG would have had to call a shareholders meeting to seek approval for its underwrite - a process that would likely take two weeks.

The panel's decision stated that the proposed underwriting by GPG could result in its doubling its shareholding in Tower to 20 per cent - the Takeover Code threshold.

Should that occur, the panel ruled, it would materially increase GPG's effective control of Tower.

For that reason the panel decided GPG needed shareholder approval.

The refusal to grant the waiver was greeted with glee last night by the backers of the alternativedeal - but nobody was willing to write GPG's Tony Gibbs off entirely.

"This should be the end, but who knows what he might come up with," Shareholders' Association chairman Bruce Sheppard mused.

"We have won a victory overall because it's a pro rata rights issue. It's a victory for shareholders' rights."

Tower chairman Olaf O'Duill said he doubted there was now a way for GPG to underwrite the issue.

"If the stock exchange turns it down, I don't think there's much you can do."

O'Duill emphasised that the main priority was getting the cash into Tower so that it could get on with business.

"Everything else is a sideshow ... If people want to argue about who owns the place, well, that'll be a healthy argument in due course.

"But right now it's getting in the way of the final goal of getting the money for Tower."

Earlier yesterday, Gibbs said he was pleased Tower would get its money either way.

"None of this would have happened if we hadn't been there to make sure it got the dough."

Gibbs would not comment on the rejection of the GPG-backed recapitalisation plan.

Tower's shareholders will meet in Wellington on Friday to vote only on the removal of the company's 10 per cent shareholding cap.