Merger in name only
Tolhurst accepts a radically reduced compensation after waving goodbye to its broking business and Patersons takes control.
Beleaguered stockbroking firm Tolhurst has been forced to dramatically reduce the terms of its merger with Patersons, raising the question of whether "merger" really is the right word to describe the transaction.
On January 27, Tolhurst entered into a term sheet to merge its broking business with Perth-based Patersons Securities, whereby Patersons would pay between $6 and $7 million in stock for the business. That has now been reduced to between $1.9 and $2.1 million, subject to quantifying employee entitlement provisions and other adjustments. All in all, Tolhurst will receive a proportional holding of between 5.2 and 5.8 per cent of Patersons.
Tolhurst cites a number of reasons for the reduction in terms, including further trading losses, a reduction in what fixed assets will be transferred and the retention of working capital within Tolhurst to meet current near-term commitments.
Tolhurst will nevertheless still have the right to increase its shareholding in Patersons through the exercise of options, depending on the uptake of shares by Tolhurst advisors and subject to Patersons shareholder approval. If shareholders do not approve, Patersons will compensate Tolhurst with $100,000 – which once upon a time was the same size of a run-of-the-mill annual bonus.
The latest announcement caps off a run of bad luck for Tolhurst, which returned to trade on Tuesday last week after the late submission of its half year accounts. Earlier in the month Tolhurst was one of 20 firms suspended for failing to lodge its return to the ASX on time (Tolhurst slips up, March 2). A Tolhurst spokeswoman told Business Spectator that the firm was "never told about" a missing audit report. ASX demurred that this was standard procedure.
In its results Tolhurst reported a 39 per cent drop in revenues and a 1559 per cent fall in net profit.
While Patersons takes Tolhurst's broking business, Tolhurst entered into an agreement with MMC Contrarian early this month to sell its Community & Corporate Financial Services (ComCorp) business for $8.455 million plus $1.623 million for the recently acquired financial planning group Affiliate and Hillmac.
ComCorp provides financial advice to members of credit unions and similar organisations, advising on approximately $800 million worth of funds under management. ComCorp was initially purchased in 2007 for $31 million. Tolhurst's Brisbane-based corporate advisory business Interfinancial, founded by former Merrill Lynch Australia boss Greg Bundy, is meanwhile being sold via a management buy-out. Bundy resigned from the Tolhurst board on March 10.
In the end Tolhurst shareholders will meet on Friday to vote on the Patersons merger and change the company's name – or at least what's left of it – to Robe Australia. It serves the end of a company that was formed in 2001 from the merger of D&D Tolhurst, founded in the 1930s, and William Noal, established in Melbourne in 1857.
On January 27, Tolhurst entered into a term sheet to merge its broking business with Perth-based Patersons Securities, whereby Patersons would pay between $6 and $7 million in stock for the business. That has now been reduced to between $1.9 and $2.1 million, subject to quantifying employee entitlement provisions and other adjustments. All in all, Tolhurst will receive a proportional holding of between 5.2 and 5.8 per cent of Patersons.
Tolhurst cites a number of reasons for the reduction in terms, including further trading losses, a reduction in what fixed assets will be transferred and the retention of working capital within Tolhurst to meet current near-term commitments.
Tolhurst will nevertheless still have the right to increase its shareholding in Patersons through the exercise of options, depending on the uptake of shares by Tolhurst advisors and subject to Patersons shareholder approval. If shareholders do not approve, Patersons will compensate Tolhurst with $100,000 – which once upon a time was the same size of a run-of-the-mill annual bonus.
The latest announcement caps off a run of bad luck for Tolhurst, which returned to trade on Tuesday last week after the late submission of its half year accounts. Earlier in the month Tolhurst was one of 20 firms suspended for failing to lodge its return to the ASX on time (Tolhurst slips up, March 2). A Tolhurst spokeswoman told Business Spectator that the firm was "never told about" a missing audit report. ASX demurred that this was standard procedure.
In its results Tolhurst reported a 39 per cent drop in revenues and a 1559 per cent fall in net profit.
While Patersons takes Tolhurst's broking business, Tolhurst entered into an agreement with MMC Contrarian early this month to sell its Community & Corporate Financial Services (ComCorp) business for $8.455 million plus $1.623 million for the recently acquired financial planning group Affiliate and Hillmac.
ComCorp provides financial advice to members of credit unions and similar organisations, advising on approximately $800 million worth of funds under management. ComCorp was initially purchased in 2007 for $31 million. Tolhurst's Brisbane-based corporate advisory business Interfinancial, founded by former Merrill Lynch Australia boss Greg Bundy, is meanwhile being sold via a management buy-out. Bundy resigned from the Tolhurst board on March 10.
In the end Tolhurst shareholders will meet on Friday to vote on the Patersons merger and change the company's name – or at least what's left of it – to Robe Australia. It serves the end of a company that was formed in 2001 from the merger of D&D Tolhurst, founded in the 1930s, and William Noal, established in Melbourne in 1857.
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