Hotchin urges investors to ignore their dislike of him and take Allied deal

Monday 7th December 2009

Mark Hotchin, one of Hanover Finance’s high-profile owners, urged investors to ignore any personal dislike of him and accept the $400 million all-stock deal offered by Allied Farmers to get the failed finance firm out of moratorium.

Hanover and Allied Farmer executives and directors gathered in Wellington as part of their 10-stop roadshow around the country to muster investor support for the deal. Hotchin said it was “hard to miss” the antipathy investors have towards him. Still, he urged them to set aside their personal feelings and take the best offer available.

“The risk we have here is that emotion drives your decision which we don’t think is in your best interest,” Hotchin told investors. “I need to try, if I can, to show you the merits of this deal.”

Hanover’s independent directors are recommending debenture and note holders accept the $400 million all-stock takeover which would see them take control of more than 90% of an enlarged Allied Farmers. The listed rural services company wants to take on the Hanover loan books and put good assets in its finance unit to boost available equity and push it into the NZX 50 Index.

Last Friday, investors in Hanover subsidiary United received a letter from trustee Perpetual Trust that raised concerns about the share offer as well as the financial position of Allied.

Shares of Allied will vote on the proposal tomorrow. Only 50% of voting shareholders need to approve the deal, whereas all four Hanover units need a minimum of 50% voter participation as well as securing 75% in favour of the deal for it to proceed.

Allied chairman John Loughlin said his company has several other options in the pipeline to raise capital if the deal sours, though he declined to give details.

He said Allied Nationwide Finance, the company’s finance arm, is gunning for at least a BB credit rating, to allow it to participate in the government’s extended deposit guarantee scheme, though he was undecided as to whether they will take up that option.

“We’re absolutely committed whichever this goes to become a first-rate serious scale business,” he said. “We want a rating that we can sustain with our current business model.”

Last week, Loughlin told sharebrokers he was confident of being able to extract value from the Hanover loan book, saying Alliance already has experience in recouping value from its own debtors.

Hotchin and fellow owner Eric Watson injected some $76 million of cash and property into the business in last year’s moratorium, along with a guarantee of a further $20 million if required. Last month, Hanover posted a $102 million loss and confirmed the best-case scenario would offer debenture holders 70 cents in the dollar.

Hanover and United have $296.8 million of debentures and term deposits and total securities of $317 million. A year ago, the same assets were valued at $516.6 million.

Businesswire.co.nz

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