Hanover takes aim at Allied
Hanover Finance's directors are accusing Allied Farmers of mismanaging the former finance company assets it gained from a debt-for-equity swap in late 2009.
Friday, February 11th 2011, 7:47AM
by Jenny Ruth
In a letter to investors, Hanover chairman David Henry and Hanover's half owner Mark Hotchin say they have been "alarmed at the decline and continuing erosion in the value of the assets that were transferred to Allied Farmers."
They say investors are contacting them in increasing numbers who share their view wanting to know what action Hanover's board is prepared to take. They say Allied is ignoring the plan promoted to investors in late 2009.
"It would appear that the financial difficulties facing Allied at the time were a lot worse than presented," the letter says, complaining that assets and cash which were to have improved Allied Nationwide Finance, Allied's subsidiary which went into receivership in August last year, never materialised.
"As a consequence of its financial difficulties, Allied appears to have sold assets well below fair value, creating losses and further diminishing the value of the remaining assets," the letter says.
"Instead of using the proceeds from these sales to enhance and preserve shareholder value, Allied has used this money to repay its own debt. We have seen more than $40 million in cash realised through the "fire-sale" of Hanover assets, yet none of this has resulted in an increase in shareholder value or a dividend distribution to you as shareholders," it says.
The resignation of Allied's chairman "raises concerns about possible disunity and governance within that board."
Former chairman John Loughlin resigned in August and was replaced by Garry Bluett.
The letter accuses Allied chief executive Rob Alloway of "a very deliberate and orchestrated campaign" to deflect media attention away from Allied's mismanagement of the Hanover assets "by promoting misinformation against Hanover and its director Mark Hotchin."
The Hanover assets sold to Allied in late 2009 were then valued at $396.2 million. They have since been written down to just $94.3 million.
Hanover and its directors are being investigated by the Securities Commission and the Serious Fraud Office and before Christmas the commission gained a High Court order freezing Hotchin's assets in New Zealand.
Also in December, Hanover started legal action over Allied's refusal to pay it $5 million.
Hanover's letter says it will now actively campaign to have Alloway removed from Allied's board.
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