GPG reaps $220m in profit

Tony Gibbs

Sir Ron Brierley's Guinness Peat Group is sitting on a profit of as much as $220 million from its investment in insurer Tower and its former subsidiary, Australian Wealth Management.

Shares in AWM yesterday surged from A$1.82 ($2) to as high as A$2.07 in the wake of its agreement to merge with rival Select Managed Funds.

The rise represents a gain of more than A$1 on the price AWM shares were issued to Tower investors when it was separated from the insurer and listed on the ASX last February.

Forsyth Barr analyst Guy Hallwright said GPG's investments in Tower and AWM and its support of share issues at both companies over several years amounted to about $155 million. These stakes are now worth $375 million - a gain of 140 per cent - after the Select deal, which was disclosed to investors late on Thursday.

"They have done very well, extremely well," Hallwright said.

Shares in GPG, which holds 34.71 per cent of AWM and 3.10 per cent of Select and 18.1 per cent of Tower, rose 2c to $2.20.

Tony Gibbs, GPG's New Zealand executive director, said: "One has to try hard for one's shareholders."

Tower's shares were down 1c at $2.15. The merger between AWM and Select is designed to create a competitor to rivals such as the major banks and insurers. The market value of the new firm - which will keep the Australian Wealth Management badge - is likely to push the A$1 billion mark.

AWM chairman Robert Thomas said the merger would offer further revenue growth opportunities from an expanded financial planning distribution network and product and service offering. "One of the merits and aims of putting these companies together is to give it the financial base to participate in further consolidation in the financial services industry and that involves acquisitions," he said.

"We've made a couple of small acquisitions in Australian Wealth Management last year - we're looking at others coming through ... it's just not the nature of this industry to stand still."

AWM acquired ABN Amro's two corporate trust businesses last June, four months after it listed on the Australian Stock Exchange.

Select, a superannuation, administration and funds management specialist, also made small acquisitions, including the Merrill Lynch Super and Pension Fund in November.

Select managing director Chris Kelaher, who will replace AWM managing director and chief executive officer Andrew Barnes in the new group, said there were several areas where the firms could achieve greater scale.

"We don't offer self-managed funds so that's something they do in that business that we'll be giving a lot of consideration to [offering clients]," he said.

"It's a very competitive market but we have a different style with a higher service component so we should do very well."


Profitable play
* GPG is sitting on a profit of as much as $220 million from two investments.
* The investments are Tower and Australian Wealth Management.