Clock ticking on rebel deal with Tower

By PAULA OLIVER

Tower's directors are likely to decide within 48 hours whether to run with a rebel proposal to inject cash into the ailing insurer.

The proposal was discussed last night by Tower's Melbourne-based chairman, Olaf O'Duill, and his Wellington colleagues via telephone.

O'Duill received notification of the proposal's existence through a letter, and he said he anticipated a "couple of late nights" as Tower's board weighed up its merits.

The board must decide if the new proposal, understood to be a pro rata rights issue that does not include a share placement, is a better deal for shareholders than Tower's existing $200 million agreement with Guinness Peat Group (GPG).

That agreement has been criticised for being too sweet for GPG.

"The emails have been running hot," O'Duill said last night. "I would expect within the next couple of days we'll have a decision."

The new plan is led by investment bank First NZ Capital and backed by big Tower shareholders.

Their revolt against the GPG-backed recapitalisation is motivated by the fact that GPG would gain a 30 per cent stake in Tower, and effectively control, through a discounted share placement.

It is understood that the new deal is not vastly different to the three for five at $1 pro rata rights issue part of the GPG deal - the difference being that it does not include a placement.

It will raise fractionally more cash than the $203 million the GPG deal would raise, and be fully underwritten.

Options include a two for one rights issue at 60c a share, or a one for one at $1.20 - both of which would raise $210 million. A five for three issue at 80c comes up with the same result.

Sub-underwriters are understood to have a deadline of today to return signed documentation confirming their position.

O'Duill said that he had given instructions for Tower to seek independent advice on the new deal.

He said Tower's GPG directors, Tony Gibbs and Gary Weiss, would have no part in discussions about which proposal to go for.

"They have a conflict of interest. We will obviously keep them informed about how we are thinking, but they can't do anything to influence the outcome. I understand the law very well and I don't intend spending any time in jail."

Several issues have arisen from confirmation that a new deal is on the table for discussion.

Firstly, Tower's planned extraordinary shareholder meeting, scheduled for next Friday, may not be needed.

Should Tower's board choose to go with the new proposal, shareholder approval would not be required.

But O'Duill has already booked an airline ticket to Wellington, and he is keen to tell shareholders in person what Tower has chosen and why.

The removal of Tower's 10 per cent shareholder cap may also need to be voted upon.

Clouding the issue further is a pre-emptive right GPG holds to underwrite any alternative share issue to its own.

GPG has threatened to walk away from Tower if its offer is not progressed.

It has also previously stated that it is the only one so far to come up with the money Tower needs.

Shareholders Association chairman Bruce Sheppard yesterday said that O'Duill was more than capable of leading Tower if GPG departed.

"He hasn't had a chance to shine yet. But putting it bluntly, he has a bloody good batting average when it comes to company turnarounds."

O'Duill said he was confident Tower could go on without GPG.

"The company's future won't be affected by GPG walking away one way or the other if we have the appropriate capital injection," O'Duill said.

"The GPG directors staying or going, I don't think will affect the way this place is driven. I never plan for failure and I'm not used to it."

A public announcement will be made immediately if Tower's board elects to go with the new proposal.