Stock Takes: GPG intrigue

Tower has made noises about AMI Insurance. Photo / Natalie Slade

Guinness Peat Group may well be on its way out, but that does not mean there will be an end to the intrigue that has tended to surround the stock since its inception.

Shareholders have voted in favour of a $160 million return of capital and this is likely to be the harbinger of things to come for the former corporate raider.

But just how GPG goes about unwinding its complex web of investments will be exercising the minds of many an investment banker and fund manager around the traps. And it's a process that is likely to take two or three years, says GPG chairman Rob Campbell.

Closest to home is GPG's biggest investment in New Zealand - a 35 per cent stake in Tower Group, which itself is cashed up and in a strong position to make an acquisition in its own right. Tower has made noises about making a move on the earthquake-ravaged AMI Insurance.

Coincidentally Goldman Sachs is advising both GPG and AMI on their respective capital structures.

"Of course the approach that we'd take in terms of capital will really depend on how much we need, if we need anything at all," said AMI chief executive John Balmforth. "It could range from a partial investment in the company to a full sale, depending on the capital requirement.

"Tower's made some comments that they're interested in us and we've had no formal discussions with them and we won't be in a position for some time before we know which option we want to take going forward."

The process of backing Tower out of GPG is unlikely to be straightforward, because the stake is of a size that would make any successful buyer mount a full takeover for the company.

Then there are the myriad of other, seemingly disparate assets, such as holdings in Turners and Growers and Turners Auctions, and Australia's Alinta Energy, Ridley Corporation and AV Jennings. As founder and former chairman Sir Ron Brierley said: "Things are not over yet."

CONTACT TOP UP

Contact Energy's $351.2 million rights issue fell a little short but the remainder was made up through a small book-build to institutions. Contact, which is just over half owned by Australia's Origin Energy, allotted about 65.7 million new shares - about 94.5 per cent of the offer - arising from the 1 for 9 right issue. An additional 3.8 million new shares were sold through the book-build. Contact said the funds raised will be used to strengthen its balance sheet for investment in growth opportunities, the first part of which is the Te Mihi power station.

Contact closed down 16c at $5.86.

VOLATILE HEARTLAND

Heartland New Zealand, the finance company with banking aspirations, has seen its share price tread a volatile path since it listed on the NZX on February 1.

The shares, which were issued at 88c, have since traded in an 18 cent range between 68c and 86c. The stock closed up 1c yesterday at 74c. Heartland, which intends to apply for a banking licence this year, will replace Pyne Gould Corp on the NZX-50 Index as of June 20. The organisation comprises the merged activities of Pyne Gould's Marac commercial finance arm, CBS Canterbury, and the Southern Cross Building Society.

TRADE ME TALK

Local fund managers ears' pricked up on renewed talk that publisher Fairfax Media, is conducting a strategic review of Trade Me. Fairfax has engaged investment bank UBS to consider a broad range of strategic options involving Trade Me that could potentially lead to the partial float of the digital business. Australian analysts estimate Trade Me could be worth A$1.1 billion ($1.4 billion) to A$1.3 billion. Fairfax paid $750 million for Trade Me in 2006.

Fisher Funds managing director Carmel Fisher said Trade Me would be a welcome sight in a market starved of initial public offers. "There is little information out there at the moment but conceptually, it would be interesting," she said.