ASB, StoreFund 'in talks'

By LIAM DANN

The sharemarket is watching to see if ASB Bank negotiates out of listing specialist retail property investor StoreFund on the sharemarket.

StoreFund - which is expected to buy the BBQ Factory with the money raised in its initial public offering - was due to list yesterday.

Market speculation is that a large shortfall in acceptances has left the ASB unhappily holding at least 50 per cent of the stock.

The bank underwrote the offer to 20 million shares - worth $1 each - while the target was to raise $30 million.

The offer closed last Friday.

StoreFund's assets are to be managed by a group called North Head Management which includes former TranzRail chairman Wayne Walden, former Farmers finance chief Garry Bluett and Leigh Davis of Jump Capital. News that the listing was delayed was delivered in a short statement to the stock exchange on Wednesday night.

It said discussions were ongoing between the underwriters and the StoreFund directors. A revised date for listing, if any, would be advised when those discussions were complete.

The market is speculating that the pair are in legal negotiations.

"If you've got a pair of binoculars, point them at the top floor of the ASB tower and you'll see some intense negotiations going on," said one broker.

Speculation was rife yesterday about how badly the initial public offer had gone and why and how ASB was trying to extract itself.

Neither Walden nor BBQ Factory boss Roger Richwhite returned calls yesterday. ASB Securities managing director Tim Preston has declined to comment.

Market watchers say ASB may be unhappy with the level of fees it would have to pay to North Head Management.

North Head could command more than $400,000 a year based on the current capital structure of StoreFund. Those fees could grow if North Head were to follow through on its stated intention of developing its assets to $100 million within five years.

There didn't appear to be anything in the agreement that allowed ASB to opt out of going to market, a broker said.

But if both parties agreed to go back to investors and admit there had been a massive shortfall, and that the money was being returned, then most people would probably be happy, he said. However, it appears the parties have so far failed to agree on that point.

Last month Herald business commentator Jenny Ruth raised concerns about the high fees that were part of the management contract.

The Herald has confirmed that other brokers raised the issue with ASB when the offer was first touted.

It was "interesting" that ASB expected the public to wear those fees but was not so keen on them once it owned the company, a source said.

If ASB is trying to extract itself, it will have to weigh up any payouts to StoreFund or North Head for issuing costs and lost management fees against the cost if the shares bombed on listing. Some brokers have suggested they would drop at least 20 per cent.

The contract

* StoreFund is to be managed by North Head Management, a company owned by Leigh Davis, Wayne Walden and Garry Bluett

* North Head promoted the StoreFund share offer

* North Head is contracted to run StoreFund until June 30, 2009

* North Head's fee is 1.75% of StoreFund's "invested amount" a year, plus a performance fee of 20% of the gain in market value above a benchmark rate of 12%

* The "invested amount" is StoreFund's market capitalisation plus debt, minus any cash held

* A market value of $25m would give North Head an annual base fee of more than $400,000