Tower looks to pounce with $81m

Financial services group Tower will fund potential acquisitions and its growth strategy from the proceeds of a $81.3 million rights issue announced yesterday, says chief executive Rob Flannagan.

"The capital raising is consistent with Tower's strategy for business growth. The additional capital will provide support for Tower's organic growth strategies and enhance the group's financial flexibility to take advantage of strategic opportunities that may arise," he said yesterday.

Tower would continue its pursuit of growth, which was placing demands on working capital, and it was likely that some of the proceeds of the rights issue would be applied to that as well as potential acquisitions.

"We need to be a bigger company just for the economies of scale and therefore some nice little acquisitions on top of all of that would just be really nice for the group and add value for shareholders," Flannagan said.

The company thought it prudent to raise cash before specific opportunities arose.

"We just want to be in a position where we can manoeuvre and take those opportunities as the economy starts to come right and as some companies that are still suffering a bit of stress may want to get out of this market."

Flannagan pointed out there were about 40 KiwiSaver providers at present.

"We think there has to be some consolidation in that area."

Under the rights issue, eligible Tower shareholders will be entitled to five new shares for every 16 they hold on the offer's September 2 record date.

The new shares will cost $1.34 against Tower's closing share price yesterday of $1.74 - down 7c.

Shareholders with an entitlement of up to 200 rights will be able to sell them via a sale facility or those that wish to buy more than their entitlement will be able to apply for additional shares, to the extent that the issue is not fully subscribed, via an excess subscription facility.

Guinness Peat Group, which holds 34.9 per cent of the company, has indicated it will take up its entitlement but it is constrained from increasing its overall holding.

The offer is fully underwritten by Goldman Sachs JBWere which has the right to place any shares it acquires as a result as it wishes.

The new shares will be allocated on September 28 and begin trading on September 30.

Flannagan said Tower's fundamentals were sound, as highlighted by its last sets of results, including conservative gearing of 17 per cent.

The four-month period since then had seen a continuation of satisfactory results and, assuming normal and stable trading conditions for the remainder of the financial year, "the board expects the full-year underlying profit to be in line with market expectations".