The rejection by Fidelity of Tower's bid to buy its rival life insurer could turn Tower itself into a takeover target - possibly by Fidelity, Craigs Investment Partners broker Peter McIntyre said yesterday.
Last week, NZX-listed Tower began a cash and scrip takeover bid for all of Fidelity Life Assurance, valuing the target company at $118 million.
The notice of intention offered $82 per Fidelity share, made up of $55 in cash and $27 in Tower shares.
In a letter to shareholders, Fidelity chairman Ian Braddock called the bid "unhelpful" and "inappropriate" and advised shareholders to take no action.
Two major shareholders, which when combined represented 70% of the company, had told Fidelity they would not be accepting the offer.
Fidelity Life chief executive Milton Jennings said that as a life company, Fidelity was larger than Tower.
Farmers Mutual Group, which held a 10.8% shareholding in Fidelity also signalled its opposition to the takeover notice.
Chief executive Chris Black said the bid was unrealistic and significantly undervalued the company.
"We would not want to see Fidelity Life's sound business model, its proven performance, as reflected in the annual results announced this week, and its successful track record unnecessarily put at risk," he said.
For Mr McIntyre, that ended the deal and put Tower at risk of being taken over by a large Australian life insurer or by Fidelity.
"It's no secret that banks are keen to fund corporates and we are in a merger and acquisitions phase of the recovery."
A major insurer, such as QBE, or an existing player in New Zealand could see acquiring Tower as a chance to build market share. Even banks, which were keen to build their wealth management and insurance businesses, could be interested, he said.
GPG was a Tower shareholder and it was always keen to sell at the right price.
With a share price high of $4 and a low of 93c, Tower's business fundamentals were considerably undervalued, Mr McIntyre said.
Forsyth Barr broker Peter Young said the Tower bid for Fidelity was highly conditional and he was sceptical that it would proceed in its current form.
