Major investors raise red light at Redflex

red-light camera operator announced a $32 million capital raising, and with the Pratt family's private investment company Thorney Holdings orchestrating a boardroom putsch.

Redflex wants the cash to strengthen its balance sheet, keep its bankers happy and, to use an old favourite, allow the company to "respond to new opportunities".

Just hours after the announcement, a blunt letter arrived at Redflex headquarters informing the board that the three biggest shareholders Renaissance Smaller Companies, Hunter Hall Investment Management, run by Peter James MacDonald Hall, and Thorney, run by Alex Waislitz wanted to replace three members of the board.

All up, Hunter Hall, Renaissance and Thorney control 24.95 per cent of Redflex.

In the firing line are chairman Chris Cooper and non-executive directors Roger Sawley and Peter Lewinsky. Cooper is the fourth-biggest shareholder in Redflex, with 1.93 per cent of the stock, while Sawley and Lewinsky both make the top 20 list.

Robin Debernardi, who retired from the board in June, Max Findlay and Ian Davis have been nominated as new directors. Credit Suisse is advising the trio of major shareholders, who are unhappy with the board's decision not to entertain takeover offers below $3.50 a share.

Redflex shares slumped 25? to $2.15 on news of the capital rasing; the shares haven't traded above $3.33 in the past year. The raising is being done at $2.04 a share.

In its latest results, Redflex recorded a 9.1 per cent fall in net profit to $9.6 million for 2008-09. The bulk of its $130.9 million of sales came from the US, where Redflex is the dominant traffic system provider. It did not pay a dividend.

The terse letter, from Credit Suisse executive director Michael Naphtali, said the major shareholders wanted the removal of the directors to take place at the annual meeting on November 19.

Moves contra Bolton

THE top brass at Brookfield Multiplex have fired another shot in its defence against a takeover bid from Nicholas Bolton, who is stalking embattled Multiplex Prime Property Fund.

Brookfield Multiplex, the responsible entity for Multiplex Prime, lodged an application with the Takeovers Panel last week to prevent Bolton from buying any more shares and increasing his 19.9 per cent stake.

The 27-year-old investor's private company has offered 0.3? a unit for the rest of Multiplex Prime, which has traded at the market floor price of 0.1? a share for months.

Australian Style could buy the rest of Multiplex Prime for just $677,000 but would be liable for the $112.2 million instalment payment due on the units in 2011.

Now Multiplex Colt Investments Trust, a major shareholder in Multiplex Prime and controlled by Brookfield Multiplex, has made a similar application to the Takeovers Panel to stop the bid. Multiplex Colt is the beneficial owner of 21.6 per cent of Multiplex Prime.

According to the application, the bid from Australian Style "has an unacceptable coercive effect on unit holders because" it could trigger an immediate call from Multiplex Prime's bankers. The property trust is in breach of its banking covenants.

Brookfield Multiplex wants the panel to block Bolton's bid unless he can obtain a commitment from the fund's financiers not to make the call, and prove Australian Style has the funds to meet its potential $112.2 million obligation. The Takeovers Panel has not set a date to consider the matter.

Concept

gurgles

THE recession and a changing political landscape have caught up with Sydney-based Concept Economics the economics firm headed by Telstra adviser Henry Ergas, who also has links to Opposition Leader Malcolm Turnbull.

About 20 staff are believed to have lost their jobs after Concept Economics was placed in administration last week. Liquidator Michael Jones, of insolvency firm Jones Partners, is now in charge.

BankWest is believed to be the major creditor, having extended a $15 million line of credit to Concept Economics in May 2008.

Over the past two years Concept Economics has been hired to the run the rule over the Federal Government's national broadband network (NBN) and its climate change legislation, and to conduct a review of state planning legislation. More time, it seems, could have been spent examining the firm's own financial model.

Concept Economics was in the spotlight last year after a taxation review commissioned by Turnbull was shelved. That review was drafted as a response to the Henry review of the tax system, and included a proposal to introduce a flat tax by 2015. Concept Economics has been critical of the NBN plan, claiming the network will cost $200 a month for retail customers.

Cashmere crisis

IT'S official the global financial crisis truly is global, and is now affecting the goatherds of outer Mongolia.

Job losses and the shrunken bonuses of world bankers have trickled through to the price of commodities used to make luxury goods. In particular, the price of cashmere on world markets has plummeted.

A year ago, before the collapse of Lehman Brothers, the spot price on the Mongolian cashmere market stood at 42,000 tugrik a kilo (about $US38). Of that, cashmere producers were getting about $US27.50 a kilo.

In June 2000, the cashmere spot price stood at a peak of 45,000 tugrik a kilo, but in June this year the price hit a low of 19,500 tugrik a kilo.

Demand from the key markets of Europe and the US has fallen about 35 per cent this year as troubled fashion houses seek out cheaper materials.

According to the World Bank, wages for day labourers in capital Ulan Bator have more than halved, and the country's banks also face a subprime lending problem of their own defaults on loans to nomadic goatherds.

Mark Hawthorne is on leave next week. Christopher Webb will be writing the Full Disclosure column.