DNZ seeks approval for $35m raising

Alastair Hasell. Photo / Supplied

DNZ's 8200 shareholders will be asked to vote on a $35 million capital-raising deal to pay out chief executive Paul Duffy and ex-chairman Alastair Hasell.

The investors, who have been complaining of losing up to two-thirds of their money, will now be asked to stump up the $35 million to pay the two who own the management contract.

The management company has been running the business, now struggling under a huge debt and forced to sell real estate.

Tim Storey, DNZ chairman, yesterday said DNZ, which owns property valued at $700 million, was considering raising the $35 million but would seek shareholder approval first.

That follows DNZ's announcement on Friday that it would pay $35 million for Duffy and Hasell's management contract.

Last year, DNZ launched a failed plan to raise $130 million, pay Duffy and Hasell $43 million and list on the NZX.

Duffy and Hasell are now due to get less than Deloitte's valuation around $50 million or Northington Partner's $43 million valuation.

Derek Button, a retired builder and DNZ shareholder, said the lower payout was not completely palatable but not as bad as $50 million.

"It's a horrible thing that's happened but they are within their rights to do it," he said of Duffy and Hasell. "They were clever enough to buy the management contract in the first place and they must have known what would happen."

Storey said yesterday the new deal, including the lower management payout, was the best path.

"Following recent meetings with shareholders and shareholder representative groups, the board considers it appropriate to undertake a small capital raising that would be made available as a priority to all existing shareholders.

"The feedback we received from the shareholder meetings was a preference for a smaller capital raising that would be accessible to as many shareholders as possible.

"The board has settled on a $35 million pro rata offer to be made to existing shareholders followed by a book build for shares not subscribed for by the company's existing 8000-plus shareholder base," Storey said.

On Friday, DNZ announced a conditional agreement to pay Duffy and Hasell $32 million to terminate their management contract.

But the board said an additional $3 million would be paid for the Diversified NZ Property Fund management contract also held by Duffy and Hasell.

After the $35 million cash payment, $10 million is to be reinvested back into DNZ Property Fund, the board said.

Storey said there was unanimous agreement to pay the two men well below either of the previous independent valuations.

"It's still a significant sum but it is at a level that will ensure real benefits to shareholders. We have also discussed this with MMG Advisory Partners and members of the Money Managers Action Group," Storey said.

"Both groups agree we have to move the company forward to begin restoring value ... they accept the management contract has to be bought out and the management function internalised and they have indicated their support for the terms the independent directors have negotiated."

Duffy stays on as chief executive.