DNZ shake-up in hands of shareholders

DNZ executive director Paul Duffy. Photo / Sarah Ivey

DNZ Property Group's 8200 shareholders this week vote on resolutions which could see a radical shake-up of the business.

Five options were put to investors at 11 shareholder meetings on a national tour by the board where three critics are also standing for two directorships.

But investors are unable to vote on DNZ's options at Ellerslie on Wednesday.

The notice of meeting from DNZ chairman Tim Storey asked shareholders to vote on proposals that they:

* Have no confidence in the existing directors or managers, a motion put by critics MMG Advisory Partners;

* Terminate capital-raising, a move already made by the board;

* Seek disclosure of full independent reports so they can see documents from Northington Partners and PricewaterhouseCoopers;

* Elect two new board members. The candidates are Peter Fletcher and Peter Bruce of the Money Managers Action Group and David van Schaardenburg nominated by MMG.

About 200 investors at last Wednesday's Auckland meeting heard how any new DNZ board would consider its future.

Options put to the shareholders were liquidation at the worst extreme through to NZX listing with capital-raising at the more optimistic extreme.

All options require internalisation of a highly controversial and lucrative management contract owned by DNZ executive director Paul Duffy and business founder Alastair Hasell. Cancellation of B-class shares held by the bosses who can outvote A-class shares held by the 8200 shareholders is also likely.

Northington Partners last year valued the DNZ management contract at $43 million. Deloitte valued it this year at $50 million. Duffy and Hasell have engaged their own lawyers on the management contract deal.

Existing directors - Storey, Duffy, Michael Stiassny and John Harvey - say the best option is to list on NZX and raise capital to reduce debt from its current 48 per cent to 35-40 per cent.

Capital raised would also be used to pay out Duffy and Hasell and cut the punitive $328 million debt.

DNZ's board thinks the listing and capital-raising fulfils all the aims of restructuring the business: providing sustainability of dividends, prompting greater volumes of shares to be traded, reducing the share price discount to NTA at $2.20 yet the shares trade at only around 73c, lowering debt levels and improving corporate governance.

"The directors are of the view that, given all the information currently available to them, an NZX listing and capital-raising strategy is the best option for the long term if shareholders want the opportunity to unlock the value of their shares, want to create stronger governance, a structure where all shareholders are equal and create the opportunity for a sustainable long-term dividend policy," Storey wrote to investors in the notice of meeting.

DNZ Issues

Problems:

* Dividends uncertain.

* Limited shareholder rights.

* High debt levels.

* Few shares traded.

* Low share price.

Solutions:

* Stay the same.

* Liquidation.

NZX Listing:

* Listing + capital raising + private share placement.

* Listing + capital raising + entitlement offer.

- Source: DNZ Property Fund shareholder briefings April/May