It's almost inevitable a larger player will look to take over general insurer Tower, a fund manager who bought some of the shares sold by Guinness Peat Group (GPG) says.
GPG on Monday sold its entire 33.6% stake in Tower at $1.70 a share - a 10% discount to Friday's market closing price - in a transaction expected to yield just over $118 million.
Devon Funds Management director Paul Glass said he did not expect any immediate takeover bid for Tower but that it would happen eventually.
"Tower looks like one of the few under-valued stocks on the New Zealand (Stock) Exchange to us," he said.
The company had gone through some dramatic restructuring, going from a company with four divisions to only one division.
"So it's sold those other three divisions, it's carrying a lot of surplus capital," Mr Glass said.
"Part of that is an RBNZ requirement but partly they are going to have sufficient capital to make some large returns to shareholders, so they've already announced a further capital reduction of $70 million, with the expectation of about another $40 million of surplus capital to come back after that," he said.
"So fundamentally, it's a business to us that looks attractive but, of course, it's not without its risks and, in particular, it continues to have a large exposure to Christchurch."
Devon owned just under 10% of Tower before the GPG sale.