Radius shareholders in a bind over offer

SHAREHOLDERS OF Radius Properties are spurning an offer of 42 cents a share from a company associated with two Radius directors, but appear blocked from accepting an offer for the company’s properties that would deliver a return of 59c a share.

Both offers are well below the shares’ net asset backing of 77c, but as the shares can’t be easily traded, investors are unable to reap the full value of their investment.

The 42c-a-share offer by Montagu Investment Holdings – the ultimate shareholders of which include Radius Properties directors David Glenn and Sandy Maier – has made little headway. However, Montagu controls enough of the Radius shares to make a vote on accepting the 59c offer, if Radius directors choose or are forced to call one, unlikely to pass.

The 59c offer is being made by Radius Residential Care (RRC), the company which rents the aged care buildings that Radius Properties owns.

Montagu bought 19.99 per cent of the shares of Radius Properties at 42c a share in an offer late last year, and though its recent offer to buy a majority stake has stalled, it has told shareholders it will not accept the 59c offer because it considers that undervalues the assets owned by Radius.

That 19.99 per cent stake, plus the backing of 3.92 per cent of other Radius shareholders, means that even if a vote on the 59c a share offer were called – and the directors of Radius do not look like calling one yet without being forced to – 94.5 per cent of the remaining shareholders would have to vote in favour of the 59c offer for it to be passed.

That’s a very hard bar to pass as shareholders are notoriously hard to motivate to vote in such numbers.

Brian Cree, managing director of RRC, has blasted Glenn and his fellow directors.

‘‘In our view, the Radius Properties board is severely conflicted and appears to be acting with self-interest,’’ Cree wrote in a letter to Radius Properties shareholders.

He described the 42c-a-share offer by Montagu as predatory

‘In our view, the Radius Properties board is severely conflicted . . . ’

and unfair.

Cree said the RRC offer for the properties had not been ready to go, but it had been forced by Montagu’s attempt to buy more shares, an offer which he has written to all Radius Properties shareholders.

Cree told Sunday Star-Times he believed that as so much money needed to be spent on the properties to modernise them, shareholders could expect to have their shareholdings diluted by further Radius Properties capitalraising if the 59c offer was not accepted and Radius Properties was allowed to continue as owner.

RRC had the equity and financing available to upgrade the buildings, he said, assuring shareholders that the 59c offer

Brian Cree

was ‘‘fair’’ and that RCC could free up shareholders’ capital quickly.

Glenn, who told Sunday StarTimes he was speaking as a director of Radius Properties not an ultimate shareholder of Montagu, said the board of Radius was working hard to get both Montagu and RRC to improve their offers. The board wanted to see some conditions removed from the RRC offer, and said shareholders would be kept informed.

‘‘Once the terms are more certain, we can assess the merits of the offer and then the board can decide as to whether it goes to shareholders,’’ Glenn said.

It may not be something the board has any say in if Cree can gather enough shareholder support to require a vote, something he is confident of achieving.

One aspect of the offer that will raise eyebrows among investors is that one of the former directors of Radius Properties, Tony Hannon, who was ousted by disgruntled Radius Properties shareholders following years of poor performance, is a director of RRC.

Cree acknowledged that, but said Hannon was a director representing Healthpoint Investments Limited Partnerships, a minority shareholder in RRC, which raised money from sophisticated investors including iwi.