Hope you're right--I have bought in after being alerted by the...

Hope you're right--I have bought in after being alerted by the HC posts.

Tower spin-off plan shakes some interest
Sep 30
Stewart Oldfield


Trans-Tasman insurer Tower has received a number of approaches about a possible trade sale of its Australian wealth management businesses in the past fortnight, heightening investor expectations of further industry consolidation.

Tower chairman Olaf O'Duill said the company had received a number of approaches from non-bank members of the local financial services industry about buying the wealth management business since announcing a fortnight ago it was investigating a spin-off of the business before the end of the year.

AMP and Axa Asia Pacific are seen as the most likely to be interested in Tower's prime wealth management asset, Bridges, a master trust and financial planning business with more than 150 planners and $3.7 billion in funds under management.

The wealth management business's second-biggest unit is Tower Trust, a trustee and administration service provider. The two businesses made $14.8 million in combined profit in the 12 months to March.

Valuations placed on wealth management businesses have recovered in the past 12 months as equity markets have rebounded strongly.


This is good news for the major banks, which have spent more than $15 billion over the past four years to take a stranglehold on the industry. But analysts have questioned price multiples implied by Challenger's $91 million takeover of Associated Planners in August and the valuations placed on newly listed IOOF Holdings.

IOOF has been one of the most successful floats in the past 12 months, its shares more than doubling in value on speculation the likes of St George Bank or Perpetual Trustees could launch a takeover bid for the former mutual.

Professional Investment Services, Australia's second-biggest financial planning network, said this week it was in talks about a possible sale or float of the business.

Mr O'Duill said it was a good time to list Tower's wealth management operations and the company had so far refused requests to conduct due diligence on the Australian business as it would be too disruptive.

"We have had a few inquiries. But what we have been saying is that if you are really that keen, once it's listed you can make a bid."

But he left the door open for any lucrative offer. "If someone put a cheque on the table that was so big you could not climb over it, sight unseen, then we would have to have a look at it."

A board meeting in Wellington on Tuesday is expected to advance the spin-off plan, which the board hopes to complete by Christmas. Caliburn Partners, advising Tower on the spin-off, is expected to give the board an update on its progress.

Mr O'Duill dismissed suggestions the business was too small to exist as a separately listed entity and that a $NZ255 million ($238 million) book valuation was robust.

"We have two pretty profitable businesses here," he told The Australian Financial Review.

Shares in Tower have risen more than 70per cent in the past year as fears of further capital raisings have subsided.

But Deutsche Equities questioned whether a spin-off of Tower's wealth management operations was the best option, saying a trade sale would be easier.

"Earnings may well recover strongly over the next 12 to 18months. But if the outlook was that rosy, why has Tower opted to rid itself of Australian wealth management?" the broker said.
Fin. Rev.