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Tower’s day (or three) in court

GPG confronts Tower over demutualisation proposals in the High Court at Wellington.

Monday, December 7th 1998, 12:00AM

by Philip Macalister

Swords were drawn immediately at the High Court in Wellington today, as the hearing on Tower Corporation’s proposal for demutualisation and listing launched straight into the attack.
Details of Tower chief James Boonzaier’s salary were passed about the courtroom on a scrap of paper (Justice Wild saying he would remain ‘enviously in the dark’ as to its amount) as Bill Wilson QC, representing Guinness Peat Group, put Tower’s Chief Financial Officer Keith Taylor under the griller.
GPG, which has been circling Tower for over a year and want to merge it with its own finance subsidiary Tyndall Australia, came up with a revised plan for doing so just days ago. However, this was unanimously rejected by Tower board members at a meeting late last week.

The GPG scheme has been filed as an affidavit to the current High Court hearing and today its lawyer Bill Wilson was given top slot on the programme, moving directly into cross-examination of Keith Taylor and Tower’s Actuary Darryl Hayes.
Wilson spent the morning tackling Taylor on the relative merits of the Tower scheme and the values assumed in comparing the Tower plan with the GPG/Tyndall proposal. One bone of contention was the plan to issue partly paid shares to policyholders in Tower’s subsidiary companies, which Wilson said was being done at the expense of policy holders in the parent company.
He also queried the Tower board’s intention to issue up to 7.5% of the listed company’s capital in shares and options to Tower staff through a series of employee schemes, representing a total $50 million. However, Taylor said that one employee scheme covered around 2000 staff and another 100 to 200 senior executives "and I think a substantial portion of those shares would be paid for".
A continued debate about the values used when comparing the Tower and Tyndall proposals, as market values obviously only available for Tyndall (which listed on both the Australian and New Zealand exchanges) and the latest accounts for Tower are now dated September 1997, only served to spotlight the difficulties in comparing the two schemes.
While Merrill Lynch and actuaries TACIT Group have come out in support of GPG’s scheme, describing it as fairer and superior, the Tower board maintains (a view echoed in court today by Taylor) that it benefits Tyndall shareholders rather than Tower’s own members.
After a morning of provocation, Taylor wound up with the retort that the Tyndall proposal could be explained as, in exchange for a proposal which could be worth around $700 million to policyholders , "here is $328 million of Tyndall shares. But don’t worry, because they’re going to double in value."
Tomorrow a group of individual Tower members will have a chance to have their views heard and Michael Campbell QC, for Tower Corporation, will then present the proposal for demutualisation and listing. The hearing isn’t expected to be wrapped up until Wednesday.
The proposals in a nutshell
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