Allied jumps gun over report

Rob Alloway. Photo / Dean Purcell

Allied Farmers says the independent report on its proposed debt for equity swap with Hanover investors concludes that the offer is "fair", superior to the current moratorium or receivership, and that a better offer is unlikely.

However Allied appears to have jumped the gun by including the report's conclusions in a letter to its shareholders dated November 20 and posted on its website.

The report, prepared so that Hanover and United debenture holders owed can make an informed decision on the proposal, has not yet been released to them.

The investors are owed about $500 million by Mark Hotchin and Eric Watson's finance companies.

In its notification of the special meeting required to gain shareholder approval for the deal, Allied states the failed finance companies had commissioned a report from corporate advisers Grant Samuel "for the benefit" of Hanover and United investors. Allied says that the report concludes:

"(a) the proposal is fair to Holders and superior to the status quo and receivership and that an alternative superior offer is unlikely; and

(b) the consideration being offered by Allied Farmers is considered fair."

In the letter, Allied tells shareholders a copy of the Grant Samuel report "is available at www.hanover.co.nz". However, it was not available last night.

Allied goes on to tell its shareholders: "The Grant Samuel report has not been prepared for them and does not consider the proposal from the perspective of an Allied Farmers shareholder."

Hanover chairman David Henry yesterday said the merits of the Allied proposal had now been evaluated by Grant Samuel and the resulting report, with formal notices of a meeting to vote on the proposal in Auckland on December 16, and explanatory materials approved by trustees, would be sent to investors by early next week.

Hanover spokeswoman Hilary Marett refused to confirm whether the Grant Samuel report had been completed but Mike Knowles of Guardian Trust, the trustee for Hanover Finance investors, said it had been, "and it's currently being printed".

On being told that the report's conclusions appeared to have already been published and what those conclusions were, Knowles said: "That's good to know that that's what's been said, but I won't comment because I don't think it's fair to just put out some conclusions without people reading the whole report."

Yesterday, Allied Farmers managing director Rob Alloway told the Business Herald he understood the Grant Samuel report was "largely completed" but he had not seen a finalised copy.

When informed of the inclusion of the report's conclusions in his company's notice of special meeting, Alloway said the notice had been finalised and released late on Tuesday. He understood it had been forwarded to Hanover's attorneys for proofing and checking.

"Talking to our attorney I understand that they have seen a copy of the final report as has, I expect, [Allied Farmers chairman] John Loughlin."

Meanwhile, responding to a Business Herald report that a rival offer to Allied's proposal may be in the offing, Henry was yesterday sending mixed messages.

"We have no knowledge of any other interested party," he said in a statement, before going on to reveal Hanover was "aware of some other interest in the past few days".

"But we now understand this is not going to proceed in a formal offer. Instead, we understand this party may look to take a position with Allied Farmers if the vote is successful."

This week an investment banking source told the Business Herald his firm was working on a "superior" alternative offer to to Allied's proposal from "a far more credible party" and there was "a reasonably good chance" the offer would be tabled within three or four days.

Alloway said Allied's signed sale and purchase agreement with Hanover meant the company was now committed to running the proposal past its investors.

Alloway said he understood Hanover's board could still decide to allow another party to conduct due diligence.