Tower’s attempt to buy independent NZ life insurer Fidelity Life seems to have stumbled at the first hurdle, with Fidelity’s two main shareholders rejecting the bid.

According to a letter sent to Fidelity’s shareholders by Chairman Ian Braddock, the two major shareholders, which own 70% of the company, have said they will reject the offer.

A trust connected with the company’s founder Gordon Watson owns 53%, while another trust owned by Greg Burgess owns 17%.

The other big shareholder is Farmers’ Mutual Insurance Association, owning 11%. It has also indicated it will reject the offer.

Mr Braddock has told shareholders to take no action, and the company is preparing a formal response to the offer.

“The approach from Tower is unsolicited, unhelpful and, in our view, inappropriate,” he said. “Tower has indicated that it will seek some information from Fidelity.

“Tower is, however, a competitor and so we do not believe it would be in the best interests of shareholders for us to provide any confidential or sensitive information to Tower in relation to this proposed offer.”

He says the Fidelity model using independent advisers is the reason behind the company’s success and the board sees no reason for changing it.

Fidelity has just announced a $NZ16.9 million ($12.92 million) net profit for the 2010 financial year, which is up 63% on the previous year.

At this stage, the Tower takeover offer will become formal on October 16. In the meantime, Fidelity will appoint an independent financial adviser to evaluate the bid and produce a report – including the board’s recommendation on the offer – to be sent to shareholders.