GPG gets green light on Tower rights underwrite

UPDATE

Tower has the green light to go ahead with a capital-raising package underwritten by Guinness Peat Group (GPG) after a stock exchange watchdog cleared it on two counts.

NZX's Market Surveillance Panel (MSP) today said it had granted GPG, which owns 9.9 per cent of Tower, a waiver from its listing rule requiring shareholder approval for a related party transaction.

The commercial terms of the underwriting agreement between Tower and GPG were negotiated at "arms length", MSP told the exchange this morning.

"The panel has also been provided with written assurances by Tower that GPG had no influence on, or input into Tower's deliberations or decision-making process..."

Financially troubled insurer Tower plans to raise $210.8 million and shore up its financial position. The company has $428 million in debt, some $100 million due in early August.

The capital-raising would be through a rights issue at 90 cents a share to existing shareholders, Tower said today, noting JB Were was the sale's organising broker.

Following today's MSP waiver, GPG would underwrite the sale for a fee of $5.3 million, or 2.5 per cent of the amount to be raised, plus a management fee of $1.1 million, or 0.5 per cent.

The four-for-three rights offer could result in GPG holding as much as 13.75 per cent of Tower, it said.

Under the terms of the agreement, GPG could only own 15.6 million Tower shares (13.75 per cent).

It would not have voting rights on shares above that threshold, and would ultimately have to divest itself of them, MSP said in its ruling.

However, Tower's 4.3 per cent shareholder, Hanover Group, yesterday complained to the MSP that the agreement broke a listing rule whereby a shareholder could not increase its stake from an underwriting arrangement.

In relation to this complaint, the panel said: "Tower have advised the panel that JB Were is following standard New Zealand practice with respect to the structure of the sub-underwriting arrangements."

Credit Suisse First Boston and First NZ Capital, who were major backers of the rejected Hanover underwriting proposal, would be included as sub-underwriters in the GPG scheme.

Meanwhile, JB Were was already undertaking a detailed analysis of Tower's share register and would be watching GPG's shareholding threshold, the MSP said.

Hanover, half-owned by Auckland businessman Eric Watson, had earlier protested GPG's initial capital-raising proposal for Tower, saying it was not fair to all shareholders.

At 11.30am, Tower shares were up four cents to $1.57 while GPG shares were up one cent to $1.58.

- NZPA