By Duncan Bridgeman
Friday 20th June 2003
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Hanover this week emerged as a key player after picking up a 3.4% stake.
The Eric Watson and Mark Hotchin-owned financial services company is working with two other shareholders on a pro rata-rights issue as an alternative to GPG taking a share placement.
The three, including institutional investors Axa Asia Pacific and AMP, hold 13% of Tower between them.
"We still recognise that GPG is an important component of the future of Tower. We're not naive enough to think that if we vote them down it's all going to be beer and skittles going forward," Mr Finnigan said.
"Whatever outcome we have I think it is important that GPG are part of it."
However, whether the group could get GPG to move from its position remained to be seen.
"It's not a great position to be in," he said.
Under the proposal GPG will be issued 50 million Tower shares at $1.35 each and will underwrite a $1 per share rights issue for a fee of $2.7 million.
Shareholders will vote on the deal on July 4.
The GPG issue, backed by Tower's board, needs approval from 50% of the non-GPG shares.
"We haven't really done the numbers on where the balance of power is held," Mr Finnigan said.
"The shares are widely held through the public and there's no certainty as to whether [they] are going to vote one way or the other."
Critics see the deal as too sweet for GPG, which could gain control of Tower at a premium.
"The GPG proposal is favourable to GPG," Mr Finnigan said.
An independent report by advisers Grant Samuel described the GPG proposal as fair but said a pro rata issue would be better.
The problem was the apparent lack of underwriters other than GPG.
Mr Finnigan said Tower was fundamentally still a good business, despite its massive writedowns and a looming August 8 deadline for repaying a $A100 million bank loan.
The plunge in its financial status had been brought about largely by accounting policy changes.
"We are speculating as to what the banks will or won't do if Tower misses that repayment. But if GPG gets voted down the answer is [Tower] would have to have an alternative to the GPG offer."
Hanover's original plan had been to get to just below 5% "and then try to secure a position which would take us up to 9.9%, so we were obviously looking to get to a similar position to GPG," Mr Finnigan said.
"We felt 9.9% might have given us a seat on the board."
Hanover hadn't done any due diligence on Tower and would not have gone any further without doing so.
The GPG share placement proposal had changed that plan fundamentally. If the proposal goes ahead, GPG would have up to 35%.
"We haven't acquired our 4.3% to secure a position of being a kingmaker in respect of this transaction," Mr Finnigan said.
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