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GPG Dumps Tower Australia Stake

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Aug 8 NZPA - Tower New Zealand shares rose 4.76 percent to $2.20 in afternoon trading after its 35 percent owner Guinness Peat Group sold out of Tower Australia at what is believed to be a $A200 million ($NZ256) profit.

The investment company set up by Sir Ron Brierley is now cashed up and feeling vindicated about its foray into the Australasian insurance industry a decade ago.

"Every dollar we are getting out of this we have worked very hard to get," said GPG director Tony Gibbs. "Hats off to my colleagues in Australia who pulled off this deal," he said. GPG share rose 3.42 percent to $1.51 in afternoon trading.

GPG received an unsolicited offer of $A3.75 a Tower Australia share from Japan's Dai-ichi Mutual Life Assurance, a large life insurance company that has been expanding offshore and has now made its first purchase in Australia. Tower Australia shares closed at $A2.79 yesterday prior to the deal's announcement.

Dai-ichi is hoping to get all of GPG's 29.7 percent stake in Tower Australia without triggering a takeover. To do that it has to get shareholder approval for the purchase of the last 9.8 percent.

GPG owns 35 percent of Tower New Zealand, which was separated from Tower Australia several years ago.

Investors will be questioning whether Dai-ichi wants to invest in New Zealand as well.

"I have no idea. They approached us regarding Tower Australia," said Mr Gibbs.

GPG decided that Dai-ichi had a lot more to offer Tower Australia than GPG now did. "That's the reality," he said.

Sir Ron famously took out a life insurance policy as a young man with Government Life, the predecessor of Tower New Zealand.

Tower had no money and was looking sad when GPG invested in it, Mr Gibbs said. The investment was bold and many people said GPG did not know what it was doing in insurance.

Many of GPG's actions involving Tower were controversial and rivals included Eric Watson.

Mr Gibbs declined to say what GPG would do with the profit.

"We've got lots of money anyway. We don't have a problem with having a lot of cash at this point in time," he said.

He told Fairfax Media that it would be "a very wrong assumption" to think that GPG's Tower New Zealand stake would now be up for sale.

Today's deal consists of three tranches with 14.9 percent sold unconditionally, the sale of a further 5 percent subject to approval by Australia's Foreign Investment Review Board and Australian Prudential Regulation Authority and 9.8 percent subject to the approval of both Australian regulatory authorities and Tower Australia shareholders.

Tower Australia today welcomed Dai-ichi as its major new investor.

"We will both enhance our core capabilities and deliver incremental shareholder value," Tower Australia managing director Jim Minto said.

Dai-ichi, established in 1902, is Japan's oldest mutual life insurance company and one of the world's top ten life insurers based on its premium income of $A33.9 billion.

Tower Australia and Dai-ichi have entered into a business cooperation agreement covering strategic and operational issues that will come into effect if Tower shareholders approve the deal.

GPG two directors on the Tower Australia board, Dr Gary Weiss and Mr Michael Jefferies, will resign immediately.

"Tony Gibbs would be a fantastic mentor of wayward teenagers. Based on his stewardship of Tower he has great patience, nurturing skills, the courage to make tough decisions and, most importantly, the ability to deliver a positive outcome over the longer term," business commentator Brian Gaynor said in a recent column.

GPG's involvement with Tower dates back to 1998 when GPG, through its Australian subsidiary Tyndall, tried to convince the company its best option was to back the organisation into Tyndall instead of a demutualisation.

After a bitter battle, Tower's members voted overwhelmingly in favour of demutualisation but GPG did not go away.

There have been many twists and turns since then making it difficult to calculate GPG's profit on the exit from Tower Australia but it is believed to be in the region of $A200m.

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