CBD
Say it ain't so, Joe.
Mining veteran Joe Gutnick (pictured) is in danger of losing his "Diamond Joe" nickname after all but selling out of a company that hopes to mine shiny rocks in the Northern Territory.
Gutnick's US vehicle, Legend International Holdings, used to own more than 50 per cent of ASX-listed Merlin Diamonds but last month sold all but a handful of shares. The transactions reaped Legend $12.74 million but it's not clear to CBD whether that represents a profit or a loss.
Peter Lee, who wears Legend and Merlin hats as secretary of both companies, didn't seem to know either.
"I haven't done the calculation," he said. Lee also declined to say why Legend didn't sell into a takeover bid being mounted by Singapore's Innopac Holdings, an investment company that started life as Colonel Sanders Kentucky Fried Chicken Pte Ltd in 1973.
This is something of a puzzle, because, on the back of CBD's envelope, the deal being offered by Innopac appears much more lucrative than selling on the open market. Innopac earned the endorsement of the Merlin board - including executive chairman Gutnick - by offering 1.67 of its shares for every Merlin share.
At the end of January, when the offer was made, this represented a premium of about 35 per cent. With Merlin shares falling since then, it now looks even better.
Lee said Legend's share sale and the takeover bid were "two totally separate transactions".
The bid closes on June 28 and so far Innopac has mopped up 6.9 per cent of Merlin.
Meanwhile, Merlin is about to issue 8 million convertible notes to a mysterious company in tax haven the British Virgin Islands.
The money is to be used to develop Merlin's diamond field.
CBD asked if Lee could say who was behind the BVI company, ISR Investments. "No, because I don't know them," he said.
Shareholders will be asked to approve the note issue at a meeting in Melbourne on May 24.
A fairly high rate
Red faces at community finance group Foresters, which has been pinged by the corporate watchdog for springing mammoth interest rates on its struggling customers.
According to the Australian Securities and Investments Commission, Queensland-based Foresters, which trades as Fair Finance Australia, was charging an annual interest rate on some loans of 35 per cent.
The Fair Finance website is full of talk about "helping individuals and families to overcome financial exclusion" but that's the kind of return that would make Gold Coast loan shark turned Pattaya pimp Tim "Sharky" Ward happy.
ASIC didn't ping Fair Finance for the interest rate itself but rather for telling customers in October that the rate was a slightly more reasonable 19.95 per cent.
Fair Finance said this was due to "compliance failure". It fixed the website after being contacted by ASIC "within a matter of hours", CEO Belinda Drew told CBD.
"This is where we've ended up and we've used it as an opportunity to improve the quality of what we're doing," she said. She said the rate was charged to consumers who would normally be in the pay-day lending market, where rates are "much, much higher than that".
Choose your path
CBD loves US congressman Paul Ryan as much as the next Republican, but nonetheless isn't quite sure what relevance his 2013 budget plan has to Australians.
Ryan's plan for the US budget was called The Path to Prosperity - a title very similar to the Path to Prosperity series running in The Australian "in association with GE". While Ryan's plan promised spending and tax cuts, the Australian version is a little fuzzier.
The front page of Tuesday's Oz featured a report on the rise of the "industrial internet" - a topic, coincidentally, covered in "sponsored content" downloadable from the paper's website.
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Frequently Asked Questions about this Article…
Legend International Holdings, the US vehicle linked to Joe Gutnick, sold all but a handful of its Merlin Diamonds shares and received $12.74 million from the transactions. The company has not said whether that amount represents a profit or loss, and Merlin/Legend secretary Peter Lee said he "hasn't done the calculation."
Innopac Holdings offered 1.67 of its shares for every Merlin share, an offer the Merlin board endorsed. At the end of January that exchange ratio represented about a 35% premium to Merlin's share price, and with Merlin shares having fallen since then the offer now appears comparatively more valuable. The takeover bid closes on June 28 and Innopac had acquired about 6.9% of Merlin at the time of the report.
Merlin plans to issue 8 million convertible notes to ISR Investments, a company based in the British Virgin Islands, with the funds intended to develop Merlin's diamond field. Merlin's secretary said he did not know who was behind ISR Investments, and shareholders are scheduled to vote on the note issue at a meeting in Melbourne on May 24.
Potentially. A major shareholder selling on-market can change the supply of freely tradable shares and influence takeover dynamics. Legend described its share sale and the takeover bid as "two totally separate transactions," but the timing and size of the sale—combined with uncertainty about Legend's motives—are factors Merlin investors may want to monitor.
The $12.74 million figure shows there was a sizable disposal, but because Legend hasn't disclosed whether it made a profit or loss, investors should look for company disclosures, review transaction notices and consider seeking more information at shareholder meetings or in ASX announcements before drawing conclusions.
ASIC raised concerns about Foresters (trading as Fair Finance Australia) after the company's website said a consumer loan rate was 19.95%, while some loans were actually being charged at annual rates up to 35%. ASIC's issue was misleading disclosure rather than the headline rate itself. Fair Finance corrected the website quickly and said the higher rates were charged to customers who typically use payday lending.
Merlin shareholders should note the shareholder meeting in Melbourne on May 24 to approve the convertible note issue to ISR Investments, and the Innopac takeover bid closing date on June 28.
Yes. The article flags several investor-relevant issues: major shareholders selling large parcels without clear explanation, a board-endorsed takeover that some sellers did not participate in, use of a BVI-based investor for convertible notes whose backers are unknown, and regulatory scrutiny of a lender's public disclosures. These examples underline the importance of checking company announcements, understanding related-party or offshore financing, and monitoring regulator actions.
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