20th Jun 2014 12:52
LONDON (Alliance News) - Brooks Macdonald Group PLC Friday called for China-focused private equity investor Origo Partners PLC to sell its assets over time and return the proceeds to investors, as it also hit back in the two companies' dispute over the terms of convertible, zero dividend preference shares issued by Origo in March 2011.
In a statement, Brooks Macdonald said that it has "significant concerns" regarding the corporate governance, performance, investment strategy and prospects of Origo. It said its call for Origo to sell off its assets in an orderly manner to return capital to shareholders is "unrelated" to the dispute over the convertible zero dividend preference shares.
In a later response, Friday, Origo said that it "has in fact been engaged in a detailed consultation with some of its shareholders, alongside its advisers Smith & Williamson, and Brooks MacDonald and its advisers, Cantor Fitzgerald" over the asset sale proposals made by Brooks Macdonald for "some time."
"That consultation has indicated that the company's key shareholders are supportive of certain measures aimed at facilitating the realisation of assets and the distribution of capital to shareholders," Origo said in its statement, adding that the proposals broadly follow on from its own strategic review announced last August. Under that review, Origo said it has been focused on cutting costs, making no new investments and "creating asset realisations at the right time and right value for shareholders."
Earlier this week, Origo said its net asset value fell to USD135.0 million, from USD171.5 million, over the course of 2013, hit by flat or declining commodity prices and political instability in Mongolia. This was followed by a further decline to USD115.8 million in the three months ended March 31.
"Based on discussions that Brooks Macdonald's financial adviser, Cantor Fitzgerald Europe, had with investors representing a significant proportion of Origo's share capital, Brooks Macdonald believes that other Origo shareholders share many of its concerns," Brooks Macdonald said.
Based on those discussions, Brooks Macdonald said that it has made a number of proposals that it thinks will benefit Origo shareholders as a whole, including the orderly realisation of its assets and a number of board changes to secure a more rigorous approach to corporate governance.
Brooks Macdonald also proposed the extension of the convertible, zero dividend preference shares by up to a year if it helps the sale of its assets. In addition, it proposed a "simple and transparent" basis for how capital returns are made to ordinary shareholders and the holders of the convertible, zero dividend preference shares, as opposed to requiring the holders of the latter to be repaid in full before any capital is return to ordinary shareholders.
Origo had said in February that Brooks Macdonald had raised a complaint over the terms of the convertible, zero-dividend preference shares. At the time, Origo said that any legal proceedings by Brooks Macdonald would be unlikely to succeed.
Brooks Macdonald, which holds both convertible zero dividend preference shares and ordinary shares in Origo, said it has been trying to engage with the private equity investor to resolve the dispute since 2013.
The convertible preference shares were acquired by Brooks Macdonald following its acquisition of Spearpoint Ltd, now known as Brooks Macdonald Asset Management (International) Ltd, in November 2012.
Brooks Macdonald said that the way certain terms in documents related to the matter were detailed by Origo on February 7 "gives investors an inaccurate understanding of [the] nature of that document." The two companies are in dispute about whether the convertibles should be converted into shares or if their holders should have the option of whether they can be redeemed instead in the case of a change of control in Origo.
As part of its proposals for the future of Origo, Brooks Macdonald said that it wants to resolve the dispute over the lack of a put option by removing the conversion provisions of the financial instruments subject to dispute.
Origo said it intends to continue working to reach an amicable resolution to the dispute with Brooks MacDonald over the terms of the convertible zero dividend preference shares.
Brooks Macdonald shares were Friday quoted up 2.9% at 1,534.00 pence, while Origo shares were trading down by 0.3% at 7.85 pence.
By Samuel Agini; [email protected]; @samuelagini
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