Fisher buy keeps Tower local, compeition fears raised

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

Market commentators say Fisher Funds acquisition of Tower's investment business is good news because it will keep ownership local but could also mean a reduction in competition.

Principal Carmel Fisher this morning said it had paid $79 million to buy the business with the help of TSB Bank which will take a 26 per cent stake in Fisher Funds through the deal.

Devon Funds Management's Paul Glass said it was good to see Tower's business bought by a New Zealand business.

"It looks like a good price. It's hard to get an idea of where the market was valuing the business. But as a shareholder in Tower we are relatively pleased."

But Morningstar head of research Chris Douglas said the deal could also mean less competition at the big end of the KiwiSaver market.

"I have always said I think competition is good. So I like having more providers rather than fewer."

Douglas said Fisher Fund's acquisition of Tower and AMP's purchase of AXA meant there was less competition among the big players.

"I hope it will not impact on investors. I guess we will have to wait and see."

Fisher Funds acquisition will move it from the ninth largest to the fifth largest KiwiSaver player with a 10 per cent market share.

The top four are ANZ, ASB, AMP and Westpac, which are all Australian owned businesses.

The sale, tipped here last week, is expected to be completed in April this year.

In an announcement made this morning, customers were told Fisher "looked forward to offering Tower investors the same high levels of service and communications that all out other investors enjoy and continue to enjoy. Fisher Funds' investors can rest assured that there wil be no impact on their experience, expect for the better."

The acquisition comes as the government reviews the default KiwiSaver schemes, including Tower, with officials keen on aligning fund managers' incentives with long-term returns for investors. TSB's involvement in the acquisition echoes KiwiBank's purchase of Gareth Morgan Investments last year.

Tower has been looking to sell its investment business since it completed a strategic review last year as a means to provide value for shareholders, and comes after November's sale of its medical insurance unit to ASX-listed Nib. Tower's scaling back of its business comes as cornerstone shareholder Guinness Peat Group liquidates its portfolio.

"The focus for Tower going forward will be on growing our traditional core insurance business through offering superior products backed by market leading customer services," managing director Rob Flannagan said in a separate statement.

Fisher has the rights to use the Tower brand for 12 months after the date of settlement and will manage internal funds for Tower NZ for five years.

TSB Bank is funding the purchase with a mixture of bank debt and equity from new and existing Fisher Funds shareholders.

"We are delighted to have TSB Bank as an investor in Fisher Fund along with the continued support of Morrison and Co. The support of TSB will expand our distribution capability and provide other potential beneifts," said Fisher Funds managing director Carmel Fisher.

with BusinessDesk