Tower Trust braces for new owner

By Chris Hutching

Friday 27th September 2002

Tower Trust executives met in Christchurch midweek to review the company's corporate trustee business and prepare for a marketing programme to potential buyers in the next few weeks.

Tower Trust is caught up in the turmoil affecting financial services companies in the wake of the global equities meltdown and has been the subject of rumours in Sydney last week that Commonwealth Bank might be interested in buying the company.

One of the last jobs of departing listed Tower Corporation group managing director James Boonzaier in June was to announce a "refocusing" of the group, including the sale of all or part of subsidiary Tower Trust minus the important personal superannuation, wrap service and portfolio management services.

Exactly why Tower Trust is no longer a good fit in the group is unclear, although in New Zealand the brand may have become tainted due to the highly publicised association with a handful of failed mezzanine bond issues such as the Metropolis apartment bonds where it has been unable to exercise any significant influence due to the structure of investment.

Other financial services companies facing uncertain futures include Guardian Trust, understood to be on the market. Westpac's recent purchase of Sagitta/Rothschild ushered in changes and redundancies mainly affecting staff in Australia in those companies.

But Westpac's more recent acquisition of BT Funds Management's Australian and New Zealand businesses means some Sagitta/Rothschild staff will face another round of restructuring when a team comprising representatives from Westpac, Sagitta/Rothschild and BT negotiate how operations in both countries will be structured and what executive positions will be disestablished.

Meanwhile, Tower Trust chief executive Colin Baxter is based in Adelaide, because about two-thirds of the company's business is in Australia where a buyer for the company is most likely to emerge from among the handful of interested parties.

Mr Baxter and general manager New Zealand Glenn Clark, who were in Christchurch this week, will make presentations to potential buyers. Most of Tower Trust's corporate business is in New Zealand and Christchurch-based Pyne Gould Corporation (the unlisted major shareholder in listed PGG) would be an interested buyer because there are synergies with its subsidiary, Perpetual Trust. A significant portion of Tower Trust's value is in its "back office" administration and registry services.

Listed Tower Corporation will itself be opened to the vicissitudes of the market after September 28 next year when a constitutional cap aimed at preventing takeovers is removed on individual shareholdings of more than 10%.

Tower Corporation's share price has held up relatively well in recent weeks, recovering ground this week to $3.75 from recent levels of about $3.50. The reasons are unclear but may be related to recent broker briefings outlining the way forward, particularly in Australia where it recently relocated its investment administration centre other functions are being moved from Adelaide and New Zealand to Sydney.

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