Tower opts for more equitable recap bid
Tower Limitedhas opted for what it deems a “fairer” and more “certain” recapitalisation proposal after abandoning the option proposed by Guinness Peat Group (GPG) in favour of an alternative recommendation put to it by First New Zealand Capital and Credit Suisse First Boston last week.
GPG has - until Friday - the option of underwriting the new proposal, which aims to raise NZ$210.8 million ($185 million) through a fully underwritten pro-rata four for three rights issue at a price of NZ$0.90 per share.
The GPG proposal, criticised by other Tower shareholders including Hanover Group, aimed to raise $202.9 million for Tower but would have resulted in GPG taking a 30-35 per cent stake in the company.
According to Tower’s board of directors the alternative proposal is fairer as it allows all shareholders to participate on an equal basis and offers more certainty than the initial proposal.
Tower’s chief executive for Australia Jim Minto is happy the issue is close to resolution.
“It’s very pleasing from a market perspective to see this issue of capital put behind us. While we were pleased with the initial GPG offer because that gave us some market certainty, the board has opted for the latter proposal,” he says.
“The most important thing is that private clients don’t understand that their investments are separate from the Tower share - they see both as being inter-related so it will be good to have the issue resolved.”
Tower received advice on the issue from consultancy group Grant Samuel.
“The overriding benefit of the alternative recapitalisation proposal is that it allows all shareholders to participate in the recapitalisation on an equal basis. Directors will need to consider whether the impact of extra fees of approximately two cents per share outweigh this benefit. Subject to the confirmation of the final underwriting arrangements and the removal of the remaining conditionality, Grant Samuel believes that the alternative recapitalisation is a preferred alternative,” the consultancy group says.
First NZ Capital Securities and Credit Suisse First Boston Australia Limited have both offered to underwrite the proposal with a number of institutions sub-underwriting the issue.
The underwriting fee will be 2.75 per cent plus a management fee of 0.5 per cent.
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