Buy back of TOWER Limited shares
On 17 September 2013, TOWER announced that it intended to return approximately NZ$70 million of capital to shareholders realised from the sale of the majority of its life insurance business. The Offer Document posted to shareholders contains a detailed explanation of the return of capital proposed.
Key aspects of the buy back of TOWER shares are as follows:
Why the return of capital?
Earlier this year, following completion of a strategic review, TOWER announced that it was considering proposals for delivering value to shareholders. As a part of that review, and having sold TOWER Medical Insurance Limited, TOWER returned approximately NZ$120 million to shareholders in April 2013.
TOWER subsequently sold its investments business, followed by the sale of the majority of its life insurance business. Having reviewed its capital management plan (following the issue of full insurance licences), TOWER’s Board considers it appropriate that further capital realised from the execution of TOWER’s strategic review, which is surplus to capital and business requirements, is returned to shareholders. As part of its capital management plan, TOWER intends to return up to NZ$70 million of capital under this Offer. The maximum aggregate number of shares that TOWER is offering to acquire under the Offer is 38,674,033 shares. In the event that acceptances are received for more than 38,674,033 shares, excess acceptances will be scaled back proportionately.
Why is the return of capital being carried out through the buy back?
After careful consideration, TOWER’s Board decided a return of capital via an off market, pro rata buy back was the method that best met TOWER’s objectives (including being fair to all shareholders as it offers the opportunity for shareholders to accept on a pro rata basis).
How will shareholders be affected by the buy back?
The return of capital involves an offer to buy back 1 in every 5 ordinary TOWER shares registered in the name of each TOWER ordinary shareholder on the Record Date (being 6 December 2013). For those shareholders that accept the Offer, those shares will be bought back and cancelled following the close of the Offer period. TOWER shall pay to each ordinary shareholder NZ$1.81 for each acquired share registered in the name of that shareholder, being the volume weighted average price for the five trading days prior to 17 September 2013. Shareholders on the Australian register will be paid in Australian dollars at the conversion rate applicable on the Record Date.
Participation in the Offer is voluntary. If a shareholder does not take part in the Offer (but other shareholders do participate and their shares are subsequently cancelled), their shareholding will be unaffected except that the relative percentage of TOWER shares that that shareholder holds will increase once the Offer closes and shares are cancelled.
Given the price is being set in advance of the date on which the buy back would occur, there may be a difference between the pre-set price for the buy back and the market value of TOWER shares on the date of the buy back (the market price of TOWER shares may increase or decrease between the date of the Offer Document and the date the Offer closes). While it is unlikely to be a material difference, if the price movement is significant, TOWER reserves the right not to complete the buy back at the pre-set price.
If you accept the Offer and the market price of TOWER shares increases above the Offer price, you will receive less than if you had sold your shares on-market at the same date. Alternately, if you do not accept the Offer and the market price of TOWER shares is below the Offer price you will not benefit from the higher price under the Offer.
If you hold TOWER shares on the Record Date and decide to sell those shares into the Offer, you will still be entitled to receive the final dividend payment in respect of those shares. The record date for the final dividend of NZ$0.06 per share is 22 January 2014 (one day before the Closing Date of the Offer).
What do shareholders need to do?
To accept the Offer, shareholders simply need to complete and sign the Acceptance Form posted to them in accordance with the instructions set out on that form.
The Offer closes on Thursday, 23 January 2014. If you wish to accept the Offer, we suggest that you act now to ensure your Acceptance Form is received before the Closing Date. No brokerage will be charged by TOWER if you accept the Offer, so if you have a small shareholding, the Offer presents a good opportunity to sell some of your shares without incurring brokerage costs.
The Offer is subject to a number of conditions. Of note, the Offer is conditional on TOWER receiving valid acceptances to the Offer representing, in aggregate, at least 19,460,166 shares (worth approximately $35,222,900) being at least 10% of TOWER’s market capitalisation on 26 November 2013, which was the date detailed buy back details were announced to shareholders.
The relevance of the return of capital to bondholders is set out at paragraphs 41 to 45 of the Offer Document.