Tower looms as takeover target

By PAULA OLIVER

One of Tower's two largest shareholders says it has fielded approaches about the sale of its stake - fuelling speculation that the healing insurer could soon become a healthy takeover target.

Hanover Group chief executive Kerry Finnigan yesterday told the Business Herald that hedge funds and institutions had shown interest in its 9 per cent stake.

Hanover is Tower's second-largest shareholder, behind Guinness Peat Group which holds 19.4 per cent.

"It's uncertain whether they've got somebody who wants to take the block, or whether they're just doing a block build scenario," Finnigan said of the interested parties.

"There are some punters that would lead us to believe that there's a bigger player in the wind, but it's only speculation."

Adding to the mystery is the eye-catching rise that Tower's share price has enjoyed during the past fortnight.

On April 5 it sat at $1.53, but peaked 10 days later at $1.76. It tailed off after that and closed yesterday at $1.65.

The rise means that Hanover and other Tower shareholders are looking at solid paper gains on the shares they picked up for 90c each in the company's rights issue last July. GPG, in particular, is a big winner after taking on almost 50 million shares.

And the steep rise has again dredged up speculation that Tower could be on the hit list for anyone from Westpac to Axa, or from Promina to IAG.

The chief executive of French insurer Axa, Henri de Castries, told Le Monde this week that Axa was in a position to make acquisitions in Australia, among other areas.

But Macquarie Equities investment director Arthur Lim said yesterday that the renewed focus on the list of usual suspects did not mean anything was imminent.

He said the situation reminded him of the one that recently surrounded Tenon, which is now the subject of a takeover bid from Rubicon.

Until Tenon's trees were confirmed as sold, the company was little more than an attractive prospect, he said.

But as soon as the trees were gone, a bid came in.

"I think that with Tower, when we get confirmation that its Australian arm has well and truly turned around - that's when I expect action to happen."

Tower chairman Olaf O'Duill told the company's annual meeting in February that the Australian business had returned to profitability after its "character-building" struggles.

Its next concrete figures are due late next month.

Australian media reports have suggested that Tower's share price surge could simply be founded on the market searching for the next big takeover story.

Lim said that another factor possibly influencing the scene was that corporate activity overall in New Zealand had stepped up in the past month.

Plays on Wrightson, Tenon, and Trans Tasman Properties might be rubbing off on others.

Credit rating agency Standard & Poor's noted last month that Tower's Australian business had successfully executed a large part of its rebuilding phase - "but it may take some time before this entity achieves a satisfactory rate of return".