Trading jumps in Allied Farmers stock as Hanover roadshow reaches conclusion

Friday 11th December 2009

Turnover in Allied Farmers Ltd shares has jumped to a three-year high today as the roadshow promoting its all-stock takeover of Hanover Finance and United Finance assets draws to a close.

Shares of Allied sank to a record low 20 cents yesterday, when 353,333 shares changed hands, the most since November 2006. A further 258,000 have traded so far today at the same price on the NZX, compared to daily turnover this year that has rarely exceeded 100,000 and has mostly amounted to less than 50,000. It has 37.7 million shares on issue.

The company is promoting its proposal to swallow the financial assets of Hanover and United for $400 million, effectively giving investors in the target companies 95% of an enlarged Allied while existing shareholders are diluted down to 5%.

The meetings have been characterised by the anger and emotion of Hanover investors, having been told they won’t get all their money back under current arrangements, being asked to grasp a complex transaction that will leave them with shares of uncertain value.

“We’re asking people to swap a secured debt security for an equity position,” said chairman John Loughlin. “It’s a complex transaction and somewhat counterintuitive.”

The proposal now comes down to a Hanover and United investor vote in Auckland next Wednesday and Loughlin says “it will be close.”

“There are a number of investors who do not wish to be convinced, some with an open mind and some who think anything is better than the status quo,” he said.

Loughlin managed to convince his own shareholders that taking on a loan book that is 80% bad amounts to the best way to promote the company’s economic growth and their wealth. Over 92% of shareholder votes, representing 17.7 million shares, were in favour of purchasing the financial assets of Hanover and United Finance. Allied’s shares have shed 58% of their value over the past year.

Allied would take on 13,800 Hanover and 2,600 United investors who are reeling from the news they won’t get their entire money back in Hanover’s moratorium.

Loughlin said he is unaware who was behind the large share volumes in the past two day, and NZX Ltd has made inquiries to Allied and the broker regarding the deal. The bourse regulator also referred the matter to the Securities Commission.

Businesswire.co.nz

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