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Tower ready to invade Australia

Friday 8th December 2000

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By Ray Lilley

Tower Corporation's head office move to Sydney could come as early as October next year, and will be helped by the merging of the New Zealand and Australian stock exchanges.

A growing Australian business base and a discounted share price, partly affected by the lack of tax credits in Australia, were helping drive the relocation, company executives confirmed this week.

Half its executive team is now based in Australia, with others spending up to three weeks a month working there.

Chief executive James Boonzaier and chief operating officer Ken Boag will be Sydney-based from early next year.

The company expects its shareholder base to be 60% Australian within a year, up from 50%.

Already 77% of company revenue is derived from Australian operations (69% last year), 72% of net profit (64%) and 67% of funds under management (57%).

A top-10 listing on the New Zealand exchange, Tower sees the Sydney relocation as inevitable, as its takeover activity strongly shifts its business balance across the Tasman.

The company has made four acquisitions in Australia, which helped lift its total income 31% for the year ended September.

Although it paid a lot of tax in Australia, it was unable to pass imputation or franking credits on to shareholders there.

"That is a real issue," Mr Boonzaier said. "At some point Tower will have to re-domicile its business ... [but we] don't know when that will happen."

Tower would list in Australia "fairly quickly" after an exchange merger to take advantage of the tax benefits. These were calculated at up to 14NZc a share on top of the 28NZcps dividend paid in Australia.

The share price was "far, far too low," closing at $4.85 on the day after spiking 13c on the news of a maiden full-year net profit of $99.7 million, helped by a one-off re-insurance market deal profit of $18.9 million. Tower floated at $5.65.

Tower had studied offering a New Zealand-class share but considered the Westpac move in this area "not entirely successful," chief financial officer Keith Taylor said. There needed to be complete exchangeability of securities.

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