Speirs Group Ltd has taken control of nearly 14% of Allied Farmers Ltd under a 2008 put & call option agreement, and has also signalled it intends to re-enter the finance sector in January as a minority investor in a limited partnership.
Out of the rubble of the amalgamation of 2 of the groups’ finance subsidiaries, Speirs has picked up a proprietary software system which had been written off by the receivers, upgraded it and used its new value to subscribe for 25% of the new limited partnership.
The put & call agreement was dated 29 September 2008, the day stockholders in Allied Nationwide Finance Ltd voted for that Allied Farmers subsidiary to amalgamate with Speirs Group subsidiary Speirs Finance Ltd.
In the $5.6 million deal, Allied Farmers issued $2.5 million of new shares to Speirs Group at a strike price of $1.35 and paid Speirs $3.1 million cash. Speirs reinvested $2 million of that cash in new Allied Nationwide perpetual bonds.
Allied granted Speirs Group a put option to call on Allied to redeem the bonds in 5 years at face value.
The issue now of 14,687,487 ordinary shares by a private placement, in part-payment of the $2 million debt, increased Allied’s shares on issue by 16.2% and equated to 13.92% of Allied’s 105.5 million shares post-placement. At the 19 December issue date, Allied shares were priced at 3.6c, giving the share parcel a value of $528,750. They’ve since risen to 4.8c – despite their theoretical dilution in value through the share issue – taking the parcel’s value to $704,999.
The conditional settlement also includes a $500,000 payment to Speirs by 30 April 2016. It’s unsecured & non- interest bearing.
Allied chairman Garry Bluett said in the company’s 20 December release on the settlement that Allied required an NZX Regulation waiver because Speirs director & shareholder Nelson Speirs was a director of Allied Nationwide (renamed NFA Ltd shortly before its liquidation in 2012) until recently. Speirs also required shareholder approval by way of a pre-break announcement or shareholder meeting.
Speirs, based in Palmerston North with a Marton base for its food business, was a finance company in 2008. It remained listed on the NZAX after selling its finance subsidiary to Allied and becoming primarily involved in fresh food production & nationwide distribution through Speirs Foods Ltd. It makes & distributes fresh foods, mainly fresh salads, to supermarkets & the food service sector.
In an NZX announcement on 11 December, Speirs chairman Keith Taylor said the group expected to re-enter the finance sector in January in partnership with an unnamed NZ-domiciled private equity firm, lending on vehicles & commercial plant.
The unnamed investor would control 75% of their limited partnership and Speirs would control 25%, falling to 20.5% if employees took up an offer to subscribe.
Mr Taylor said Speirs acquired a proprietary software system for the origination & servicing of loans, leases & knowhow from Allied Nationwide’s receivers for nothing, and had since upgraded it to a value of $250,000, which it used to subscribe for its stake in the general partner.
Speirs’ partner is to invest $5 million in cash equity and contribute up to $15 million as a subordinated loan. The limited partner will pay Speirs a $1.3 million arrangement fee, and Speirs will lend $1 million of that back to the limited partnership as a long-term interest-bearing subordinated loan to be used in the finance business. The limited partnership will also get up to $100 million of senior debt from a trading bank.
Attribution: Company releases.