Waltus ran into an obstacle on Monday when it went to the High Court in Wellington to get final approval for its proposal to merge 27 syndicates into one company with assets of $227 million.
The obstacle came in the shape of opposition from a group of investors and their advisers headed by Auckland based financial planner Murray Weatherston.
This group of investors, which have about $3.5 mill invested in affected Waltus syndicates, didn't vote for the merger and want out.
Under the law there are provisions which require the company to buy out disaffected unitholders.
The group's counsel, Hamish McIntosh, said outside the court that there were two main grounds for their case.
The first is a legal argument that goes like this. Under part 13 of the Companies Act there is an automatic provision for the company to buy out disaffected investors in an amalgamation.
However, Waltus have structured its merger as a scheme of arrangement under Part 15 of the act that doesn't have this provision.
McIntosh says the scheme of arrangement is an amalgamation in substance, therefore there should be a buy-out provision.
The second argument is that the merger materially changes the investment which people bought.
McIntosh says investors bought a single property, syndicated property, which could be wound up in 10 years, however Waltus are now trying to change the investment to a consolidated property company like many others already in the market place.
He says the merger proposal removes some of each syndicate's distinctive features and changes its structure.
Finally, unitholders shouldn't have this change forced on them.
The group say they aren't fighting the amalgamation and they aren't trying to delay its implementation, instead they are asking the court to get Waltus to buy them out of their investments at fair value.
McIntosh says are happy to be bought out at the conversion values Waltus established in its merger proposal documents.
The court adjourned the matter until a substantive hearing on October 12.
Waltus director Shayne Hodge was unavailable for comment last night. However, Waltus have engaged prominent Queens Counsel Colin Carruthers to represent it at the hearing.
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