Tower tops billion-dollar mark

By Richard Braddell


WELLINGTON - Tower Corporation anticipates it will have a post-demutualisation market value of more than $1 billion after it stepped up the expected value of its shares to between $6 and $8, from the $5 to $7 anticipated when its demutualisation scheme was unveiled late last year.

Releasing Tower's demutualisation information memorandum yesterday, the managing director, James Boonzaier, forecast a market value between $1.05 billion and $1.2 billion after an issue of new equity of $260 million at a mid-range price of $7 a share.

According to a proforma statement, Tower would have reported a $65.3 million profit in the year ended September 1998, had it been restructured and recapitalised on a demutualised basis.

The profit, accounted for using the Australian margin on services standards that Tower is to adopt this year, would have been derived on shareholders' funds of $688.7 million and total assets of $4.2 billion.

However, the group promises to be even larger given that it is likely to take full advantage of a provision that would enable it to raise up to $350 million in new equity should its $A195 million bid for Australian company FAI Life succeed.

The bid looked more assured yesterday after FAI Life recommended shareholders accept it.

Tower has now agreed to lift its offer from $A1.90 a share to $A1.95 conditional upon it getting acceptances in excess of 90 per cent.

As things stand, FAI's major shareholder, HIH Insurance, has agreed to sell 46 per cent in the absence of a higher offer, as has the second largest shareholder, Tyndall Australia.

Tower's chief financial officer, Keith Taylor, said a capital raising at a level of $260 million and an associated $240 million issue of debt would leave the group with long-term debt of around $100 million because $140 million would be received in two years in settlement of the partly-paids.

At that level, Tower would have a conservative gearing of 10 per cent, rising to 20 per cent if the FAI deal went through, which would compare with 30 to 40 per cent for Tower's highly acquisitive rival, Colonial, Mr Taylor said.

Tower has 400,000 members who are eligible for shares. To be entitled, policies must have been held before December 8, 1997 and up to July 31 last year.

Members will vote on the scheme at a meeting to be held in Wellington on May 10.
The scheme must be approved by 75 per cent in each class of parent company and subsidiary company members. Subsidiary company members are entitled to 50 per cent partly paid shares only.

The demutualisation has been opposed by GPG. Mr Boonzaier was unsure if a Privy Council appeal in June by GPG and Tyndall would go ahead, particularly since
Tyndall's annual report noted it was loath to appeal since Tyndall itself is the subject of a takeover offer from Royal & SunAlliance.