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7 reasons why Allied's deal will succeed

Monday, November 30th 2009, 2:23PM 4 Comments

by Philip Macalister

There will be plenty of naysayers telling Hanover investors why they should tip the company into receivership (most of them funnily enough with first names starting with B). I thought I’d give you seven reasons why the deal will go ahead.
  1. No one likes admitting to failure. Investors have shown they are reluctant to put a company they backed under. It’s like they are admitting they made a mistake. Remember the majority of investors who put their money into Hanover and United did it off their own volition – not through advisers.
  2. They voted in hope for the moratorium and they will do the same again with Allied Farmers.
  3. It’s a way of saying goodbye to Hanover shareholder Mark Hotchin and Eric Watson. Nothing like a public humiliation to make one feel better.
  4. Instead they replace them with the new Mr Nice Guy Rob Alloway.
  5. At least it’s a way out. Currently investors are stuck in the moratorium. They can’t do anything and it seems Hanover is pretty hamstrung too.
  6. Allied Farmers needs the deal as much, if not more then Hanover. Remember they are the ones who initiated it. They need the capital and the size. Without this deal its future in the finance business is less than rosy.
  7. Investors with a medium to long term view may well see the deal stacks up. Hanover’s books don’t look particularly good in the light of the today’s economic environment. But markets go in cycles and no doubt somewhere, sometime the picture could well change.
Sure I may be wrong, but hey even the Independent Report suggests receivership isn’t all it is cracked up to be.
« Hanover's winners, losers and whingersCommissions: “Know me before you judge” »

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Comments from our readers

On 1 December 2009 at 7:14 am Ricardo said:
Either way the investors will see little return. The only winners will be Hotchin and Watson. Watch this space as these two come up with something new, under a different name, with a publicly trusted front person in the future and fleece the next generation of suckers.
On 1 December 2009 at 10:19 am Wendy Milne said:
If Hanover investors can extend some foresight beyond the hype they are currently being bombarded with they will go with Allied as they are the only people with a plan that incorporates the word future,receivers dont come for free and dont share any pain of loss.
On 1 December 2009 at 1:21 pm Majella said:
Ricardo says:"The only winners will be Hotchin and Watson"

Well, I don't think so. They're still liable for the overhanging liabilities of Hanover, once the assets have been taken over, and of course, they've also collectively burnt $70-odd million dollars since TSHTF.

Wendy - so absolutely correct. In fact, if anything, receievers actually devalue assets, with the stench of death that accompanies them.
On 2 December 2009 at 11:48 am adam smith said:
I say Vote NO to Allied's offer.
I think Hanover and United investors will have rocks in their heads if they accept the Allied offer. A 12million market cap company taking over a $400 million asset - you've got to be joking.
In the argument over receivership, I think everyone including Grant Samuel have forgotten that if a receiver is appointed it will be working for the secured depositors. This isn't a case where there is a prior charge holder who has appointed a receiver and everyone else goes "he". The receiver will not be able to fire-sale everything as his duty will be to the secured depositors.
The unsecured depositors should get nothing unless all the secured debenture holders have been repaid. And NZ has a better chance of winning the Soccer World Cup than the secured investors being fully repaid.
I reckon that if the deal goes ahead and Allied issues shares at say X cents per share, it would not surprise me if sharemarket trading doesn't occur at 0.25 X or lower as holders of 1.2 billion new Allied shares rush to the exit in a totally misguided view that they will be able to sell at a fair price.
If history repeats itself, perhaps the former owners will try to buy the farm back at cents in the dollar!
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