Indian summers are often considered a good thing, unless you're the Australian Test cricket team. Or if you're at the receiving end of a trademark corporate raid from Sir Ron Brierley.
At age 74, Sir Ron is set to gain control of and chair India Equities after reaching a $8.3 million purchase agreement last month. And already the fund - originally established to invest in shares listed in India before it stopped doing so in July last year - has launched an assault with the hallmark brashness and opportunism often seen in Brierley's heyday.
Late on Friday, India Equities (INE) launched an unconditional 4.8? a unit on-market offer, worth about $3.9 million, for all the units it did not own in the Asset Backed Yield Trust (AYT) of Adelaide Managed Funds, a subsidiary of Bendigo and Adelaide Bank.
Units in the trust had last traded at 4.4?, and INE's offer ticks all the boxes when it comes to healthy premiums over historical average prices.
The twist, however, is that AYT will be delisted on Thursday, as has been the plan since September last year. AYT has liquidated its assets and returned capital to its unitholders, to the point that it now only holds loans made to individuals who invested in the ill-fated Great Southern managed investment schemes.
Needless to say, the carrying value of the loans (that is, what AYT expects to be repaid) has been marked down significantly - by about three-quarters - to about $3.8 million.
Clearly those in Brierley's camp see some value in the loans that the accountants cannot.
With only two days to go, AYT has refused a request to postpone its delisting, arguing the offer fell short of the units' net tangible asset backing of 5.5? a unit. It said the fact that unitholders only had four trading days to consider the offer was "inconsistent with the principles of the Corporations Act".
INE validly argues the offer provides unitholders with the certainty of cash in hand rather than the uncertainty of future distributions, and that AYT has historically traded well below its net tangible asset values.
But it is arguably banking on the fact that AYT has been too cautious with its provisioning. Just last month, it reduced its provisioning by 17 per cent because of greater than expected recoveries.
QUBE RAISING
The freight and logistics company Qube, chaired by former Patrick chief Chris Corrigan, has made little secret of its desire to expand its transport services to all points of the supply chain - from "pit to port".
Having broken into the ASX200 for the first time in September, Qube yesterday announced the completion of a $85 million raising through a share placement, $50 million of which will be taken up by cornerstone shareholder Carlyle Infrastructure Partners. Carlyle's stake in Qube will increase from about 10 per cent to just shy of 15 per cent.
In its announcement to the market, Qube said it was "negotiating several acquisitions and investments" across its divisions.
One clear option will be to increase its ownership in the Moorebank development site in NSW, on which a large intermodal freight terminal, in close proximity to the M5 and linked by rail to Port Botany, will be built. Qube chief executive Maurice James - himself a former Patrick senior executive - has previously admitted an interest in property group Stockland's 55 per cent share, which has been valued by some at about $200 million.
It is all part of a plan to benefit from state governments investing in rail transport services to ports. NSW in particular has had a big problem with freight congestion at its ports and roads, while use of rail for freight has declined steadily in the past five years, in part due to inadequate infrastructure. The $1 billion Moorebank terminal is designed to alleviate the problem. Qube Logistics has also invested in developing infrastructure for handling bulk materials in WA.
pwen@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
Who is Sir Ron Brierley and what action did he take through India Equities?
Sir Ron Brierley, aged 74 at the time of the article, reached an $8.3 million purchase agreement to gain control of and chair India Equities (INE). Under his influence, INE launched an on‑market offer to buy the remaining units it did not own in the Asset Backed Yield Trust (AYT).
What exactly was India Equities' offer for Asset Backed Yield Trust (AYT) units?
India Equities launched an unconditional on‑market offer of about 4.8 a unit (worth roughly $3.9 million in total) for all AYT units it did not already own. The offer was presented as cash for unitholders in a trust that was scheduled to be delisted shortly thereafter.
Why is the AYT situation unusual and why is AYT being delisted?
AYT has been winding up: it liquidated most assets and returned capital to unitholders, leaving mainly loans to individuals involved in the failed Great Southern managed investment schemes. Because its assets were largely realised, AYT was scheduled to be delisted on Thursday and only retained a reduced loan portfolio.
How have AYT’s accounting values and provisioning changed, and why does that matter for investors?
AYT’s carrying value for the remaining loans has been written down by about three‑quarters to roughly $3.8 million. However, the trust recently reduced its provisioning by 17% due to better‑than‑expected recoveries. That contrast matters because it suggests some disagreement between historical accounting provisions and what bidders like INE believe the loans are worth.
What objections did AYT management raise to India Equities' offer?
AYT refused to postpone its scheduled delisting and argued the INE offer was below the trust’s net tangible asset backing (about 5.5 a unit) and that unitholders only had four trading days to consider the deal, which AYT said was inconsistent with the principles of the Corporations Act.
What did Qube announce about its capital raising and who is the cornerstone investor?
Qube, the freight and logistics company, completed an $85 million share placement. Cornerstone investor Carlyle Infrastructure Partners agreed to take up $50 million of that raising, which will increase Carlyle’s stake in Qube from about 10% to just under 15%.
How does Qube plan to use the funds and what projects are mentioned?
Qube said it is negotiating several acquisitions and investments across its divisions. A clear option is increasing ownership in the Moorebank development site in NSW—a planned intermodal freight terminal near the M5 and linked by rail to Port Botany. Qube has also invested in bulk‑handling infrastructure in Western Australia.
What should everyday investors watch for in these types of takeover offers and capital raisings?
Everyday investors should note key signals mentioned in the article: whether an offer provides immediate cash certainty versus uncertain future distributions (INE’s argument), how close an offer is to net tangible asset backing (AYT’s objection), recent changes in provisioning or recoveries (AYT reduced provisioning by 17%), and whether a capital raising has strategic backing and clear intended uses (Qube’s $85m raising and Carlyle support). These facts can help investors weigh potential value and risk when companies are being bought, delisted or raising funds.
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