Tuesday 5th of October 2010

TOWER is incredibly audacious and a little bit cheeky with its takeover offer for Fidelity. It typical Tony Gibbs style he tries to portray it as something different to reality. On Friday he was using the word friendly and hoping that Fidelity would see the offer that way. The reality is that it’s a hostile bid. I bet it hasn’t been welcomed by Fidelity and I keep having pictures in my mind of Milton Jennings’ reaction when he heard the news. I don’t believe TOWER has a remote chance of success with this offer. Firstly the shares are tightly held with the majority being left in trust by Fidelity founder Gordon Watson. Watson, who died earlier this year, was proud of what he built and a foundation of this business is that it was New Zealand-owned and not one of the corporates. As a number of Good Returns readers have commented, Gordon would be turning in his grave at the moment. Because the people running Fidelity and the trust are so closely aligned with Watson it would be very hard for them to sell. When he died there were questions about what would happen to Watson’s controlling stake. We ran this story which gives you a good feel for the company’s thinking One wonders about TOWER’s tactics with this offer. Maybe it thinks it can be successful as history has shown us that companies set up to break the corporate mould (eg Sovereign and Club Life) have ended up becoming the opposite of what they were born as. Maybe the TOWER bid is to unsettle Fidelity and undermine it in the market place. To create doubt with advisers who support the firm? After all the numbers we are seeing show that Fidelity is doing well in the markets it competes in at the moment. Gibbs, who has been working out of the TOWER offices since he was dumped from the board of GPG, probably has plenty of time on his hands to concoct such schemes. If TOWER really wanted to buy a life insurance company there are others, which start with As, which are far more likely to be willing vendors.