Big Fidelity shareholders reject Tower bid

Tower's bid to buy rival life insurer Fidelity looks doomed to fail after Fidelity yesterday said its two largest shareholders would not be accepting the intended offer.

On Friday NZX-listed Tower began a cash and scrip takeover bid for all of Fidelity Life Assurance, valuing the target company at $118 million.

The notice of intention offered $82 per Fidelity share, comprising $55 in cash and $27 in Tower shares.

But in a letter to shareholders Fidelity chairman Ian Braddock called the bid "unhelpful" and "inappropriate" and advised shareholders to take no action on the offer.

"Directors have recommended that Fidelity shareholders take no action at this stage. Shareholders should wait for a formal takeover offer to be made and for full details of Fidelity's formal assessment of the offer."

He also said the company was "pleased to note" that two major shareholders, which when combined represent 70 per cent of the company, had told Fidelity they would not be accepting the intended offer.

Jeff Meltzer, the trustee for the Watson family which is the largest shareholder at 53 per cent, said the trust did not want to comment on its reasons for turning down the offer.

Meltzer also said it was only an intention to make an offer at this stage.

Greg Burgess, who owns around 17 per cent of the company and is the second largest shareholder, said he had rejected the offer. "It's the money - I think the offer is far too light."

Burgess said he didn't want to sell his shares because the company was a strongly performing business and he believed it would continue to grow.

"Tower are a good company but at this stage I don't want to sell."

Burgess said the offer had come as a surprise although he had received a phone call about it three months ago.

He would wait and see what the independent report said.

Farmers Mutual Group, which holds 10.8 per cent of Fidelity, also backed the other major shareholders.

"The basis for our opposition is twofold," said Chris Black, FMG chief executive.

"We concur with Fidelity that the bid is unrealistic in that it significantly undervalues the company. Secondly, we would not want to see Fidelity Life's sound business model, its proven performance as reflected in the annual results announced this week, and its successful track record unnecessarily put at risk."

Karl Trotter, another shareholder, said without securing the support of the major shareholders the offer seemed doomed. "It just seems premature and opportune."

The offer is conditional on a 90 per cent level of acceptances and on certain other matters being confirmed in respect of Fidelity's financial position.

Tower chairman Tony Gibbs said he had no comment to make on the decision by two major shareholders not to accept the intended offer.

The earliest that Tower can formally make the offer is October 15. Tower shares closed down 3c on $1.83 yesterday.