Tower Float Battles Against Tide
Sydney Morning Herald
Thursday September 23, 1999
New Zealand insurance and funds manager Tower Corp looks likely to float near the lower end of its indicative price range due to lacklustre demand from fund managers.
The $NZ350 million ($287 million) offering is being hampered by the downturn in the insurance sector which has left the float pricing looking relatively expensive.
Several institions have said they plan to steer clear of the stock since they can buy other insurers cheaply and because there is not likely to be a stag profit. The indicative price range has been set at $NZ5.80 to $NZ6.80 a share.
Managing director Mr James Boonzaier said the insurance sector's problems were weighing on demand for the offering but, he said, he was still confident the institutional book-build would be full when it closes tomorrow.
``The insurance sector is not regarded as being one of the favourite sectors and that's always a negative," Mr Boonzaier said. ``The reason is the performance of one or two major players, worries about interest rates and some concern about the Ralph tax recommendations. It means our shares will go on at a realistic price and we look forward to getting it up over the years ahead."
Mr Boonzaier said there had been strong demand for the retail offer, which closed last week.
Tower, which is in the process of demutualising, is to be listed here and in New Zealand. It will have a market worth of about $NZ 1 billion. That will make it about the 12th biggest listed company in New Zealand and should also rank it for inclusion in the ASX Top 100 index.
One fund manager said: ``It's a reasonable story without being a great one. It's in a sector that's pretty crapped out and there's plenty of stocks in the sector that look pretty cheap. Look at the valuations of Colonial and AMP. They are very cheap so we're unlikely to touch it."
At the lower end of the indicative price range, Tower would trade about 12 times forecast 1999-2000 earnings. By comparison, Colonial is trading at 11.2 times and AMP 17 times.
It is expected Australian shareholders will own about 40 per cent of the company, New Zealanders 50 per cent and other international investors the remaining 10 per cent.
© 1999 Sydney Morning Herald