Financial services company Tower is raising $81.3 million from existing shareholders through a rights issue.
Eligible Tower shareholders will be entitled to buy five new shares for every 16 shares they hold. The new shares will be offered at $1.34 a share and will rank equally in all respects with existing shares.
The offer is fully underwritten by Goldman Sachs JBWere (NZ) Ltd.
Major shareholder GPG, which indirectly held 34.9% of Tower's issued shares, had indicated that it intended to take up its full entitlement, Tower group managing director Rob Flannagan said yesterday.
There was the maxim in business that it was better to raise capital when you could rather than when you needed to, he said.
The capital raising was consistent with the company's strategy for business growth. The additional capital would provide support for Tower's growth strategies and give the group some financial flexibility to take advantage of strategic opportunities that might arise, he said.
"Our clear focus will continue to be on improving customer service, streamlining processes, strengthening business-to-business alliances and meeting shareholder expectations."
ABN Amro Craigs broker Peter McIntyre said the capital raising notice came as a surprise to the market as Tower had raised nearly $82 million in March.
"Tower is saying it wants to take advantage of any organic growth. I think it is more to do with standards for financial services changing. They will use the money to buy out smaller players to consolidate their own business."
Also, the threat from Australian financial services businesses moving into New Zealand could have led to Tower wanting to protect its business base.
The credit markets had improved and Tower was likely to be taking advantage of the better feeling in the market and among investors about buying more shares, Mr McIntyre said.
Mr Flannagan said Tower's fundamentals were sound, as highlighted by the financial results to March 31.
"The company will continue to demonstrate leadership in insurance and financial services throughout New Zealand and the Pacific Islands."
The four months ended July had seen a continuation of "satisfactory results".
Assuming normal and stable trading conditions for the remainder of the financial year, Tower's board expected the full-year underlying profit to be in line with market expectations, he said.
Mr McIntyre said the market expectations were for Tower to report a net profit after tax of between $40 million and $44 million for the year ended March 2010.
