McDouall Stuart pans Cynotech takeover bid amid full-year loss

Brokerage McDouall Stuart has panned the Hawkins' family's bid to takeover Cynotech Holdings, telling investors "not to even think about accepting" the offer.

Friday, February 26th 2010, 8:03AM

by Paul McBeth

The broker joined the independent adviser's report on the Cynotech offer in panning the deal, saying in a section entitled ‘(Pig of a) Takeover offer' "an Independent Adviser's report concluding against a proposed transaction is rare, in fact, we cannot recall the last such occurrence in the local market."

Allan Hawkins, of Equiticorp infamy, is offering preference shares in a shell company, Cynotech Securities Group, in exchange for the shares, preference shares and warrants in Cynotech Holdings. The offer puts the issue price at 13.5 cents per preference share in the private company. Interests associated Hawkins' family currently own about 22% of the listed company, whose shares last traded at 6 cents for a market value of $7.6 million.

About 23% of shareholders, almost 16% of convertible preference shareholders and about 32% of warrant holders have accepted the offer.

The finance company posted a loss of $1.2 million in the 12 months through December, compared to a profit of $2.3 million a year earlier, as it changed its reporting period from March, after it wrote down the unrealised fair value of its ice cream cone business Snowdon Ltd.

"The investment in Snowdon has been written down this year because this subsidiary is still not returning a satisfactory result and during the year, major operational changes have been made," company secretary Steve Grozev said in a statement.

The finance company had bad debt provisions of $530,000 compared to $2.3 million a year earlier, and has four loans on its books that exceed $100,000.

Grozen also said the company has appointed Deloitte to undertake a sales process for the Satellite phone services business, and had received three offers. A sale is expected to be finalised next month which "should exceed book value."

In an earlier half-year report out last week, Hawkins said he "does not believe the worst has been seen in the property and credit sector and this will continue to impact on the finance industry."

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

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