Twist in GPG's Tower sell-off

The company which spurned a takeover bid by Tower last year says it would be interested in buying parts of the listed insurer's business if the company was split up as a result of Guinness Peat Group's asset sell-down.

In October Tower said it would make a cash and scrip offer for privately owned rival insurer Fidelity Life Assurance valuing it at $118 million.

But the offer never went ahead after Fidelity's largest shareholders rebuffed the bid and its chairman labelled it "unhelpful" and "inappropriate".

Yesterday Fidelity chief executive Milton Jennings turned the tables on Tower and said it would be keen to acquire Tower's life insurance division and may also be interested in its KiwiSaver business.

"We will have a look at it. We are always looking for acquisition opportunities - obviously GPG have indicated they are keen to sell."

Sir Ron Brierley's GPG announced on Friday that it would sell down its investment portfolio which includes a 35 per cent stake in Tower.

At yesterday's closing share price of $1.98 the stake would be worth around $182 million.

The size of the Tower stake is seen as strategic but problematic because under the Takeovers Code rules any company that wants to buy more than 19.9 per cent must make at least a partial takeover offer.

Jennings said Fidelity wouldn't be interested in the entire business but the life insurance part would be a "good fit" for it.

"We would like the KiwiSaver business as well but not the rest and because that is what we would only be targeting it could make it quite difficult."

Fidelity could also face rivals in its bid for the KiwiSaver part of the business.

Market sources spoken to yesterday said at least one bank may be interested as well as several boutique fund managers.

Fisher Funds principal Carmel Fisher said it was interested in any KiwiSaver business as part of its plans to build that part of its business.

"If it is out there of course we will take a look at it."

In October last year Fisher bought the management rights of three investment funds from First NZ Capital. As part of the deal First NZ transferred its KiwiSaver scheme to Fisher Funds.

Fisher said GPG's decision to sell down its assets was the only "logical way" the business could have moved forward.

But she believed the sale of the Tower stake would not be an easy or straightforward process. "If there was a natural buyer out there, you would have seen activity on the market already. There has been plenty of opportunity if anyone had shown interest."

Forsyth Barr analyst John Cairns also predicted GPG's sale of the Tower stake was unlikely to be a "straight transaction".

"It is quite an unusual company. Most other companies are involved in either fire and general insurance, life insurance or fund management whereas they are an amalgam of three distinct businesses.

"Any buyer who has a life insurance business most probably wouldn't want to buy up the general business. As it stands there would be a limited pool of buyers in the present market."

But Tower may not be so easy to split up as it once was. In November last year chief executive Rob Flannagan said it had decided to restructure the business to move it from three separate operations into a one-company approach.

When asked if GPG would consider a split of the Tower business a spokesperson referred the Herald back to its statement on Friday which said: "GPG will seek to exit individual investments in an appropriate investment timeframe for each investment which optimises value for GPG shareholders.

"The board believes that attempting a short-term realisation of all of GPG's investment assets is unlikely to be optimal for shareholders relative to a strategy of orderly value realisation over the medium term."

The spokesman said Tower was a good business and the fact that there was interest in it was not surprising.

FOR SALE
* Guinness Peat Group's 35 per cent stake in Tower.
* Valued at around $182 million.
* Tower's business includes general insurance, life insurance and asset management.