Forum Archive Index - October 2002

["Harold J Skinner" <petzl@spamcop.net>]

http://www.theage.com.au/articles/2002/10/30/1035683474342.html

Sale rumours put cloud over Tower
October 31 2002
By Anthony Hughes
Sydney

The future of Australia's mid-sized funds managers is again in a state of
flux, amid talk yesterday that protracted sale negotiations for London-based
Royal & Sun Alliance's Australian financial services operations have
stalled.

Australasian life insurer Tower had been the frontrunner in long-running
talks to buy the operations, freeing capital for the United Kingdom-based
life and general insurance group.

But it is believed the sale of the operations, including fund manager
Tyndall and RSA's life and master trust businesses, will not proceed.

Failure to proceed with the deal puts another cloud over the future of
Tower, which is still to locate a permanent chief executive and has found it
difficult to convince its own shareholders to support such a large strategic
move.

It also comes at a time when the value of funds-management groups has dipped
in line with weak markets, calling into question the aggressive moves by
banks to buy wealth-management businesses.


One possible outcome of the deal was that Royal & Sun's senior Australian
executives, including chief executive Michael Wilkins, or head of financial
services Dennis Fox, would run the combined entity.

Mr Fox yesterday declined to comment on market speculation but said the
company was still looking at ways to free capital for the London-based
parent.

While it was a tough market and there was uncertainty about "who owns what",
the group was confident it would see improved wholesale and retail inflows
to its products, Mr Fox said.

Tyndall, with about $5 billion in funds under management, has been strongly
recovering its managed-fund investment performance in the past two years and
has been regularly placed among the top three share funds by returns. But it
has struggled to attract inflows because of the legacy of earlier years of
underperformance.

The possibility of a takeover by Tower or another player has also left many
investors unwilling to commit money because of the prospect that Tyndall's
deep value-based style could be altered.

Still, last month Tyndall clawed back some support from research houses,
when Lonsdale Securities recommended the group's managed funds, citing the
group's improved investment process under head of Australian equities Bob
Van Munster. Tower appeared to have been able to come up with a self-funding
mechanism for the purchase by securitising parts of the Royal & Sun life
operations, substantially reducing the purchase price from original
indications of about $1 billion.

Tower's share price had come under pressure from weak investment markets,
but also concern that it would have to raise equity capital from investors.
Yesterday, it rose 10 cents to $3.10.

Royal & Sun also owns home and car insurer AAMI in Australia, competing
against Insurance Australia Group and Suncorp Metway.

Last week, Royal & Sun saw its credit ratings put on "negative outlook" on
concern about its capital position the same issue that has plagued AMP in
recent months.

The group has said that by November 7 it will decide whether to raise funds
by selling stock to underwrite more business next year.



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