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| Hirco investors against promoter kin firm buyouts |
| Press Trust Of India / London Jan 03, 2009, 00:05 IST |
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Shareholders of AIM-listed Hirco, an investment vehicle of Mumbai-based realtor Hiranandani group, are threatening to revolt against a possible restructuring of the company that includes acquisition of two firms run by the promoter family, a media report said.
“Shareholders in an AIM-listed property investment vehicle are threatening a revolt over a restructuring plan that massively dilutes their interests and effectively cedes control to a wealthy Indian family,” The Times has said in a report.
As per the restructuring plan, a loss-making development vehicle of the Hiranandani family would be merged into Hirco and the family would be handed over a stake of up to 50.6 per cent.
“As part of the proposals, shareholders will lose their preferential claim on £350.8 million of shares that pay an annual dividend of 12 per cent,” The Times added.
Investors of Hirco, led by Laxey Partners, have described the plan to restructure Hirco as “shocking and ill-conceived”.
Laxey, with 10 per cent stake, has complained that the proposal, circulated to investors just before Christmas, was being pushed through too fast, leaving shareholders little say.
A special shareholder meeting to approve the restructuring has been convened in Mumbai on January 16.
In a letter to the Times, Laxey said, “No valuations for the loss-making developer, Hirco Developments, have been provided, only accounts that show it has lost money every year and has required a cash injection every year from Hiranandani”.
On December 18, the board of directors of Hirco had approved the merger through which the company would acquire the investment companies which own the current development projects — the township developments at Panvel and Chennai — and Hirco Developments, the Hiranandani development company contracted to carry out the development and marketing of the the projects.
The proposed merger would transform Hirco from an investment company into a fully integrated development company with direct ownership of the underlying investment property assets, the in-house expertise to design, develop, market and sell them; together with renewed exclusivity and non-compete arrangements with the Hiranandani family.
Other shareholders in Hirco include Standard Life, which holds 13.5 per cent, and American hedge fund QVT with an undisclosed stake thought to be around 6 per cent. It is understood that Alpine, a specialist property investment firm, is also an investor.
Hiranandanis were not available for comment.
However, Hirco on its website said, “The independent directors, who have been so advised by HSBC, consider the merger to be in the best interests of the company and its shareholders and consider it to be fair and reasonable as far as shareholders are concerned.”
The proposed merger will be effected by acquiring 99.75 per cent of the ownership interest in the investment companies which own the projects like the township developments in Panvel and Chennai and of Hirco Developments, the company said.
In consideration of these acquisitions, Hirco will issue up to 73,266,699 new shares to Hiranandani at a valuation which is based on a proportionate net present value calculation of the underlying interests of the two parties, without reference to the current share price, it said.
The attributed values equates to 712 pence a share, the company said.
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