Inside Money: Fisher and Tower inch closer to a deal

Carmel Fisher, of Fisher Funds. It is tipped to soon be announced as the successful bidder for Tower's investment business. Photo / NZ Herald

It is understood Tower is just days away from announcing the sale of its investment business with Fisher Funds widely tipped as the successful bidder.

While Fisher initially offered around $50 million for the Tower investment arm, industry sources say the final price could be as high as $100 million depending on whether the deal includes all the investment assets or just the KiwiSaver funds.

Tower manages about $4 billion, most of which is on behalf of its associated insurance business, including $900 million in its KiwiSaver products.

The eventual sale price would have been pushed higher, too, as Fisher has been competing with ASB and a mystery 'Australian boutique fund manager' (who industry insiders have told me is probably ASX-listed financial services firm IOOF) for Tower's affections.

Fisher is believed to be financing its bid for Tower along with a consortium involving Infratil director, Duncan Saville, and TSB Bank. TSB currently sells the Superlife KiwiSaver product through its branch network.

If Fisher does win the bidding war (as this column goes online on Tuesday a meeting between the two parties is expected to take place) Tower's default KiwiSaver status could come into question.

According to the Tower default KiwiSaver instrument of appointment, the Finance Minister has the discretion to revoke the default provider status after "a change of any provider... involved in administration or management of the default KiwiSaver scheme... (including a change in beneficial ownership of the provider)..."

However, with just over a year until the original default KiwiSaver contracts officially expire, the government is more likely to leave the system as is even if the Tower sale goes through. And in the only previous example of its kind (when AMP bought fellow KiwiSaver default provider, Axa, a couple of years ago) the government offered no protest.

Assuming the Fisher sale proceeds, the group could overtake AMP in the KiwiSaver rankings. According to research house Plan for Life, Fisher managed $660 million in its scheme while Tower KiwiSaver reported funds under management of almost $900 million as at December 2012, compared to AMP's $1.48 billion.

As well as the sale of its investment business, Tower has also been in talks to sell its insurance arm, with Fidelity Life understood to be the front-runner in that race.

Tower's AGM is set down for March 21 where shareholders will be asked to approve a $120 million capital return, comprising the $103 million it received for the sale of its health insurance business last September and the $17 million left over from its renounceable rights issue in 2009.