Speculation mounts over the future of Tower

Speculation mounts over the future of Tower | Insurance Business

Speculation mounts over the future of Tower
A deal for NZ's third largest insurer collapsed when the Commerce Commission turned down Vero’s application to get clearance to take over Tower.

Interest.co.nz featured an analysis of the insurer's situation with Forsythe Barr and Macquarie, and according to the financial services website, the future of New Zealand’s third largest domestic general insurer is up in the air.

“Only just keeping its head above water in the wake of the 2010/11 Canterbury earthquakes, Tower has had a potential lifeline ripped away from it for the greater good of the health of the insurance market,” Jenée Tibshraeny said.

The future of the company, the report said, now largely depends on what Vero chooses – or is made by the Commerce Commission – to do with the 19.99% stake it has in Tower.

Tibshraeny went on to say that with the takeover from Vero off the cards (at least in the absence of an appeal of the ComCom’s decision), Tower is left with two options – raise enough capital then split the company in two, or sell Tower to another buyer.

According to Forsyth Barr analysts Jeremy Simpson and James Bascand, there’s only a 10% chance of option two eventuating, simply because no one is queuing to buy Tower, Tibshraeny said.

The report also mentioned Macquarie analysts who believe Suncorp “will be looking to unwind its stake in Tower on its own accord.” The company is not expected to appeal the ComCom’s decision.

“Valuing its stake at $1.30 per share, they believe Suncorp will lose $10 million to $15 million if it sells its Tower shares for 95 cents each,” Tibshraeny said.

Interest.co.nz goes on to say it that with the chance of a takeover slim, as Forsyth Barr suggested investors to sit tight and wait for word, “Tower looks to be back to square one.”

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