Tower lines up Australian listing

By PAM GRAHAM

Tower yesterday revealed plans to spin off its Bridges and Tower Trust wealth-management businesses on to the Australian Stock Exchange.

The New Zealand insurer and fund manager is also refusing to rule out the outright sale of the Sydney and Adelaide-based businesses.

Tower has appointed Caliburn Partnership, the company that masterminded AMP's demerger, as its adviser. Investors are likely to be given shares in a separate Australian wealth-management company listed in Australia.

Shareholder approval is required for the plan, which is seen as the work of shareholder Guinness Peat Group and it is being applauded by Tower's other major shareholder, Hanover Group - which was not consulted - and analysts.

"The share price is massively undervalued and this is a clever way of unlocking that value," said Mark Hotchin of Hanover Group.

Arthur Lim of Macquarie Equities said Tower risked turning itself into a takeover target when it slimmed down.

"It is not what we are planning for but if it happens, it happens," said Tower chairman Olaf O'Duill.

The analysts also suspect that a sale of the Australian wealth-management business could eventuate from the investigation of a spin-off.

O'Duill said a trade sale could not be ruled out if someone made a significant offer, but that was not the object of the exercise.

Bridges is mostly a financial planning network bought four years ago for A$165 million ($175 million).

Tower Trust is a trustee business mostly at the retail end of the market and also offers financial planning.

Their book value is $230 million, but analysts' valuations range from $250 million to $270 million.

The idea came from Tower's board without advice.

O'Duill would not say if it was GPG's suggestion.

"Let's say everyone around the board table had a strong input into it," he said.

Essentially Tower is rejecting the model of a group of different businesses with an umbrella management, like Promina.

It will end up being a life and general insurer in New Zealand with a wealth-management business attached. It is also keeping its Australian Tower Life business.

Tower is also benefiting from inclusion in the ASX200 index from next Monday, and Hotchin said the New Zealand market had not appreciated the significance of that.

New Zealand companies struggle to meet liquidity criteria for inclusion in Australian indices. Tower is listed in Australia and New Zealand and has ruled out shifting its home market from NZ unless there is a compelling reason to do so.

The transtasman move is not good news for the New Zealand stock exchange.

"Tower's directors obviously have sound commercial reasons for making the decision that they did," said NZX chief executive Mark Weldon.

Between 30 per cent and 40 per cent of the company's shareholders are Australian.

Tower has no plans to sell or separate the Tower wealth management in New Zealand.

Track record

Tower began as the former Government Life Office in 1869.

It demutualised in 1999.

It is listed in Australia and New Zealand.

It earns 70 per cent of its revenues outside NZ.

It has $21.1 billion of funds under management.