Tower a whale of a catch for Fisher

TIM HUNTER
Last updated 05:00 27/02/2013

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The future of Tower's managing director is up in the air after the company sold its second business unit in four months.

The listed insurance company announced yesterday the sale of its asset management division to Fisher Funds for $79 million.

The deal followed the flicking of its health insurance business in November to Australian listed health insurer nib holdings for $102m.

Both transactions stemmed from a strategic review aimed at releasing value.

Managing director Rob Flannagan said yesterday Tower's strategy for its remaining general and life insurance businesses would be announced at the annual meeting on March 21.

Asked if he would be staying on to run the company, he said: "That's a good question. I'd be interested to know what the answer is."

An announcement on how the $79m proceeds would be used "will be made in due course", he said.

Tower shares were unaffected by the sale announcement, trading down barely 1c at $1.89 yesterday.

However, while the transaction did not move the dial at Tower it was a big deal at Fisher Funds as the firm celebrated becoming the biggest New Zealand-owned KiwiSaver provider.

Fisher's acquisition of Tower Investments takes its total funds under management from $1.4billion to $5.5b, ranking the firm fourth largest behind AMP, ANZ and ASB.

The combined KiwiSaver businesses will manage $1.6b for 222,338 people.

The deal includes a five-year contract to manage the assets of Tower's insurance funds.

Fisher Funds managing director Carmel Fisher said she was delighted to have concluded the transaction.

"For us KiwiSaver was the big attraction," she said. KiwiSaver and fund management in general benefited from significant economies of scale, "so we hope we can pass those savings on to clients".

Investors in Tower funds would notice no change initially and for at least six months the funds would continue to be run separately.

Fisher has rights to use the Tower brand for 12 months.

All Tower Investments staff, numbering about 69 people in Auckland and Wellington, will move to Fisher Funds on the same terms and conditions.

Fisher said she expected Tower's status as a default KiwiSaver provider, involving about $460m of client funds, would remain intact, although nothing had been confirmed as yet. "We've been talking to the ministry throughout this process," she said.

In a statement, Commerce Minister Craig Foss said the ministry would require an assurance from Fisher Funds before the deal settled that it could meet the requirements of a default KiwiSaver scheme provider, or the appointment would be terminated.

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The acquisition represents a big mouthful for Fisher Funds, which had net assets of $5.3m at balance date last March.

It is the fourth KiwiSaver-related acquisition for Fisher, which bought two small schemes from First NZ Capital and the NZ Association of Credit Unions, as well as its $20.9m purchase of the Huljich KiwiSaver scheme in May 2011. For that deal the firm borrowed $17m from ANZ and it has taken on more bank debt and a new shareholder to help finance its Tower buy.

The new shareholder is TSB Bank, which will become Fisher's second largest shareholder after buying a 26 per cent stake for an undisclosed sum.

TSB managing director Kevin Murphy said the partnership allowed TSB to expand its KiwiSaver offering. After staff were trained the Fisher and Tower products would be distributed through bank branches. 

EXPANDING FUNDS

KIWISAVER CONSOLIDATION

May 2011: Fisher Funds buys Huljich KiwiSaver from Huljich Wealth Management for $20.9 million. Scheme had 87,000 members and about $180m under management.

March 2012: Kiwibank Group buys Gareth Morgan Investments from Gareth Morgan for $58m. Includes KiwiSaver scheme with 57,000 members and $650m under management.

February 2013: Fisher Funds buys Tower Asset Management from Tower for $79m. Includes KiwiSaver scheme with 105,000 members and $894m under management.

- The Dominion Post

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