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Harbour Asset emerges as holder of Tower after GPG sells stake

Tuesday 1st October 2013

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Harbour Asset Management, the Wellington-based boutique fund manager, has emerged as a substantial security holder in Tower following yesterday's placement to sell Guinness Peat Group's stake in the general insurer.

Harbour Asset holds 12.95 million shares, or about 6.3 percent of Tower, it said in a statement to the NZX. First NZ Capital handled the placement of GPG's 33.6 percent holding at $1.70 apiece, which was mainly to institutional investors. Tower last traded yesterday at $1.80.

GPG's exit from Tower leaves the insurer without a cornerstone investor at a time when it holds excess capital following the sale of its health, investment and life units, and has ample room to maintain its dividends, which has renewed talk it is a takeover target.

Based on the website, which uses discounted cash flow analysis, the stock is valued at $5.74, meaning it is 218 percent undervalued. Tower has under-performed the NZX 50 in the past 12 months, rising just 0.3 percent compared to the index's 24 percent gain.

At its first half, the company said its long term outlook for profitability was "strong" although for the year ended Sept. 30, earnings would be impacted by one-time costs associated with its restructuring.

GPG's sale of its stake in Tower for about $118 million leaves the UK threadmaker Coats as its sole investment.

GPG plans to rebrand as Coats following the divestment process. The latest sale would lift its cash holdings to about 390 million pounds.

Shares of GPG last traded at 57 cents. The stock is rated a 'hold' based on the consensus of seven analysts polled by Reuters.

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