Hanover's Hotchin urges investors to ignore their dislike of him

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Hanover shareholder Mark Hotchin is urging investors to ignore their 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.

Monday, December 7th 2009, 9:45PM 1 Comment

by Paul McBeth

A coterie of Hanover and Allied Farmer executives and directors gathered in Wellington as part of their 10-stop nationwide roadshow to muster investor support for the deal. Hotchin acknowledged 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's 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 deal which would see them take control of more than 90% of a new-look 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 top 50 companies.

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.

Allied investors will vote on whether to accept the offer 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 Farmers chairman John Loughlin said his company has several other options in the pipeline to raise capital if the deal sours, though he declined to go into further details. He said Allied Nationwide Finance, the company's finance arm, is gunning for at least a BB credit rating, to allow them 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 advisers 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 confirmed he had to drag fellow owner Eric Watson into last year's moratorium arrangement that saw them inject some $76 million of cash and property into the business, along with a guarantee of a further $20 million if required.

Paul is a staff writer for Good Returns based in Wellington.

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