Laxey Partners, an activist hedge fund, received a setback in its attempt to oust the existing management of Hirco Plc after UK’s Standard Life Investments opposed the move.
Standard Life, which owns 13.7 per cent in the Alternative Investment Market-listed Hirco, the investment vehicle of the Mumbai-based Hiranandani family, has said that Laxey’s move to destabilise the management will harm the shareholders and affect the returns of the fund.
“We are concerned that such changes would lead to potential conflict in the joint ventures between Hirco, Hiranandani and the investment companies, which manage the development projects and ultimately lead to diminution of value for Hirco shareholders,” Standard Life Investments said in a statement.
An extraordinary general body meeting (EGM) is scheduled on May 6 to resolve the dispute between the Hirco management and the warring shareholders.
Laxey, which holds over 10 per cent, on February 20 called for an EGM to oust three directors of Hirco, including Chairman Niranjan Hiranandani, and replacing them with its own, while the Hiranandani camp, which owns a majority stake, threatened to pull out the entire board if any of its directors were ousted. Laxey also demanded that Hirco name a chairman who was independent of the Hiranandani family.
Standard Life said a merger between the Hiranandanis and Hirco on revised commercial and corporate governance terms remained the best way to enhance shareholder value. “We were concerned that the previous merger proposal was dilutive for existing shareholders and believed the payment by Hirco for a new exclusivity agreement with Hiranandani, which we estimated as amounting to £100 million consideration, was excessive and not supported by a fully independent valuation,” it said in the statement.
In December last year, Hirco proposed a reverse merger of Hiranandani realty projects with itself, to become an integrated development company from an investment company by taking direct control of Hiranandani’s projects in Panvel and Chennai in which it had invested.
Hirco was forced to abandon its plans following a backlash among investors led by Laxey, which described the proposal as “shocking and ill-conceived”. Hirco claimed support of 90 per cent shareholders.
After Hirco’s board approved the merger of the two development companies of the Hiranandani group, Laxey came out with a letter that 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.”