KEY POINTS:
Tower Australia's surging share price has fired speculation that a large investor is building a stake in the company.
But market commentators are downplaying the prospect that such a move is the prelude to a takeover offer.
Shares in Tower Australia, which were valued at A$2 before its separation from its New Zealand parent, have soared past even the most optimistic 12-month price targets, this week touching a high of A$3.17.
"We still don't fully understand why," Tower Australia chief executive Jim Minto said yesterday.
"The market is speculating that someone's accumulating a stake."
Macquarie Equities investment director Arthur Lim said with the shares now trading at way beyond any valuation "it must mean either someone is accumulating a stake or the market is running ahead of itself".
Even before its demerger last month, Tower was the subject of much takeover speculation and that increased when the company announced its plan to split, rendering its two component operations on either side of the Tasman more digestible targets.
But Lim had doubts that Tower Australia's gains presaged a takeover offer.
"Anybody who's looking to do something with Tower Australia, logically would do it by talking to GPG. There's no point buying a stake in the company when you've got a shareholder like Guinness Peat Group in there."
And in pushing up Tower Australia's share price by accumulating a stake, "it makes your job that much harder in terms of negotiating a fair price".
Lim noted a couple of brokers had promoted the view that investors should sell out of Tower New Zealand and buy into Tower Australia, where the macroeconomic environment was brighter.
"This switching process is bound to have some upward pressure on the Tower Australia share price."
Nevertheless, Lim believed some corporate activity involving Tower was on the cards.
"Tower NZ is a relatively big fish in a small pond. It's a very nice bit-sized acquisition for any one of the bigger players out there."
Meanwhile, Minto said Tower Australia's share price gains were a bonus for those New Zealand investors concerned they did not sell their entitlements to new shares in the pending GPG-underwritten capital raising because they had not received documentation in time.
Many Tower shareholders, particularly those in the South Island, did not receive documentation of their entitlements until Friday or Saturday. Trading of the rights ended on Thursday. The company was investigating how the delivery had been delayed.
Last night the shares eased back A13c at A$2.95.
