Forum Archive Index - August 2003

["Dave Missen" <d.tackle@xtra.co.nz>]

Hi Shayne and Snoopy

I have pondered the interest of GPG in Tower for some time.  They are not
stupid people based on their track record to date.  They have been
interested in Tower since the time of de-mutualisation and I think that is
because they can see methods of making the overall group more efficient -
Current restructuring initiatives by TWR have been more in the nature of
fire fighting.

The board of Tower is not in an enviable position.  They are faced with a
total change in business thinking and culture - from acting for the benefit
of policy holders to acting in the best interests of their shareholders.
Added to that, they believed they had to grow significantly if they were to
survive and prosper, and through the use of debt (which they had never
managed before) they embarked on an acquisition binge.  That acquisition
binge has resulted in massive writedowns, and while there has been growth it
is not organic growth, their core businesses have not improved performance
at all.  The fact that the writedowns occurred and some subsidiary
acquisitions have since been sold because of a lack of strategic fit is
indicative of too little due diligence in the areas of valuation, and more
particularly strategic fit between the acquirer and the acquiree.  Added to
this is the impact of catastrophes such as 9/11 that have affected the
entire sector.

I believe that GPG think they can realise significant value for shareholders
but given the poor performance of the sector overall they appear a bit
brave.  A GPG presence on the board will provide access to a significant
knowledge resource on the science of acquisitions.  I think it would also be
beneficial for the board to commence evaluating its performance as a board,
and also of individual directors.  The board must take responsibility for
the outcomes of the group, the recent comments made by the chairman
regarding outgoing CEO performance and blaming him for poor results displays
a lack of understanding of the purpose of the Tower Board and the role it
must play when an organisation is growing rapidly through acquisitions.

It will be interesting to look again at Tower in a years time.  I think the
Shares at $1.30 now are not a bad buy but I wouldn't anticipate any
dividends in the short term as I think the focus will be on growing
shareholder value through organic growth and continued strategic
acquisitions and alliances.  How they intend to achieve this will be
interesting.  Placing a value on Tower is indeed difficult as evidenced by
the groups own attempts over the period of pre de-mutualisation to the
present day.  I think Snoopy's comment is right - too many unknowns.

Dave
----- Original Message ----- 
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Sunday, August 03, 2003 1:18 PM
Subject: Re: [sharechat] Snoopy - TWR, AMP fundamentals and Wealth
Management


> Hi Shayne,
>
> >
> > So based on what you have said, im assuming you think GPG's tactics
> > regarding TWR are bewildering to you?
> >
>
> No and Yes.   I know that GPG are going to try and take control of
> Tower, with the ultimate aim of selling their stake on to some other big
> player.
>
> However, I'm not sure what big other player will be interested.  I'm not
> sure if TWR will be digestible to whoever takes it on, and that may
> slow its disposal.   I don't know the true value of the TWR business, or
> even how to work it out.  I am sure that GPG would rather buy shares
> at 90c and not $4.
>
> I suspect that GPG will come out OK from their involvement, given their
> track record.   But exactly what the profit in it will be for them, I
would
> have to guess.   What we have here is TWR investors betting on a
> completely unknown outcome.   This is speculation.    Probably good
> speculation, but nevertheless not something I would class as a long
> term investment proposition.  There are just too many unknowns.
>
> SNOOPY
>
> discl: no shares held (TWR or GPG)
>
>
> --
> Message sent by Snoopy
> on Pegasus Mail version 4.02
> ----------------------------------
> "Dogs have big tongues, so you can bet they don't
> bite them by accident"
>
>
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