Hanover urges investors to think positive

Hanover Finance shareholders have been urged to put aside the company's poor performance and any animosity towards the company's directors in voting on a takeover offer by Allied Farmers.

Stock exchange-listed rural services and financial group Allied Farmers hopes to expand and has put an all or nothing offer on the table to swap shares for $396m worth of Hanover's assets.

It would see about 15,000 Hanover investors, owed millions of dollars, receive shares for money invested in the failed property investment company.

Allied Farmers shareholders will meet in Hawera tomorrow to vote on the deal, which will need 50 per cent support from its 5200 shareholders to proceed.

The deal will also need 75 per cent support from each of Hanover's arms; Hanover Finance, United Finance and Hanover Capital, which will be voted on in Auckland on December 16.

About 250 people attended the Wellington meeting, the third of 10 investor meetings around the country pushing the benefits of the deal. While some poured scorn on Hanover, most were there to listen to the proposal.

One investor today said Hanover directors should "do the decent thing" and put the company into receivership.

Another was concerned over the status of first ranking debenture holders, who would have no similar position with Allied Farmers' shares. "Your track record in protecting the interests of secured investors hardly inspires confidence in the recommendations you now make. It is reminiscent of revolving doors and smoking mirrors syndrome."

One elderly woman slammed Hanover and it co-founder Mark Hotchin for not allowing her to withdraw her money last year when her husband needed treatment in America for cancer.

"How callous. You deserve to rot, and I hope you never have a family member go through what I have had to go through."

"We have been taken to the cleaners by one organisation, what's to say we can't be taken to the cleaners by another?" another said.

Hotchin, target of investor rage over Hanover's failure while still personally being able to hang on to a multi-million dollar property basket, urged investors to look forward, rather than backwards.

One woman said that if the deal went ahead they would be "letting Mr Hotchin off the hook".

"I understand that, it's hard to miss it," he replied. "The risk we have here is that emotion drives decision, which we don't think is in the best interests of investors.

"Don't vote on this to beat me up. You should do it because it's better for you."

Allied would have the opportunity to become a big business, he said.

He defended Hanover co-founder Eric Watson's absence from the meetings as Watson lived in England and as he hadn't been a director for a long time would not know the details of the Allied Farmers deal.

He said he had dragged Watson into last year's debt restructuring programme (DRP) as it was the thing to do. It had bought the company time for things to get better.

If the deal went ahead Hanover would have to close offices and make staff redundant, but also there were potential tax issues and some litigation, the outcomes of which he did not know.

He said he was happy to pledge that major shareholders would not participate in the Allied Farmers' shares.

Allied Farmers chairman John Loughlin, trying to convince Hanover investors of the benefits, said he saw improvements in the dairy sector, citing an increased Fonterra payout, and also improving margins in the finance sector.

The company had survived the collapses in the finance sector but was still viable. "We have been tested by the firestorm and come through," he said.

Loughlin admitted Hanover's assets would be of a scale and magnitude the company had not dealt with before, but it would be setting up a new team to deal with the "challenging loans".

They would come from Allied Farmers staff, the market and some employees of Hanover and United would come across, he said, which brought a chorus of "no, no" from the floor.

However, they would not be the people who made the loans but those who collected them.

Their experience would be valuable, he said. "We would be foolish not to learn from past mistakes."

He also said it would be the first chance for Hanover investors to realise their money. They could sell their Allied shares, however it was likely the share price would drop as those shareholders got out.

Hanover independent director Des Hammond warned that if investors rejected the Allied deal Hanover could breach its terms of the DRP.

"Unfortunately with the DRP we have very little choice as to how to manage assets. We don't have the cashflow to offer flexibility."

- NZPA