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REB recaps: What we know about The Agency v Magnolia

21 January 2021 Grace Ormsby
The Agency v Magnolia

Things took a strange turn this week when Magnolia called in a voluntary administrator to the real estate network. Here’s how things got to that point, and what’s gone down since.

The latest

On the morning of Tuesday, 19 January, REB reported that Magnolia had expressed an intention to pursue The Agency Group over an outstanding debt


Its reasoning for calling in a voluntary administrator — BDO — was that despite The Agency Group having raised additional finance and offloading assets, the debt remained outstanding after repeated calls for payment.

Magnolia also signified that it had lost confidence in the company’s board and alleged an unknown financial position to back its purported appointment.

An ASX statement from The Agency’s board has since outlined that “the alleged and disputed ‘debt’ of approximately $385,000” relates to alleged fees on a mandate that was entered into for the purpose of securing debt funding — under which The Agency said Magnolia “was unable to deliver any funding at all”.

By Wednesday, an injunction application regarding the instigation of voluntary administrators to The Agency was before the Federal Court of Australia, with the court effectively barring BDO from taking up the role of voluntary administrator at this time, and keeping the board of directors in charge of The Agency Group. 

One of the orders contained in the injunction does require The Agency Group to pay $400,000 to the court by 22 January 2021.

Magnolia’s founder, and a former director of The Agency himself, Mitchell Atkins, considered that The Agency’s payment of this money as broadly representative of the value of debt Magnolia alleges is owed — and went to lengths to stress it as “yet another example of mismanagement of The Agency Group by its directors”.

But this was an order that was first proposed to the court as an option by The Agency on an open basis — to pay the amount pending resolution of the fee dispute.

Magnolia also stressed to REB that the court had requested any secured or unsecured creditors who found themselves in a similar position to Mr Atkins’ company come forward.

Based off of the judgment, there was no request — the orders merely stated that interested parties would have an opportunity to do so in line with the proceedings.

Prior to the matter being heard in court, it’s also worth noting that Magnolia stated it would be withdrawing its plans to bid for shares in the business as a result of the voluntary administrator appointment. 

This “offer” did not even seem to be live at the time of the announcement, having appeared to have already been shut down by voters at The Agency’s AGM, by virtue of their “overwhelming” acceptance of the Peters Proposal.

UPDATE (22 January): The Agency released its half yearly results, in which its managing director reported record revenue. The highlights can be found here

The takeover attempt

Late last year, Magnolia had announced it would be conducting an off-market cash takeover bid for the real estate network. 

At the time, Mr Atkins said he had significant concerns “as to the desirability of the Peters Proposal to all shareholders of The Agency”.

The Agency’s board responded — calling out Magnolia’s unclear, conflicting and confusing “proposal” — and flagging that no formal bid for the company had been received at that time.

Continuing, the ASX announcement said: “The board of The Agency does not consider that the proposal provides shareholders with enough information to even be considered a credible ‘proposal’ or constitute a legitimate alternative to the proposed issue of $5 million in convertible notes to Peters Investments Pty Ltd.” 

All in all, the board provided six reasons for its concern. They can be found here

Then, the matter went to the Takeovers Panel, after an application from The Agency Group.

In its application, The Agency Group flagged that shareholders were, in effect, being asked to choose between the Peters Proposal and the bid: “It is therefore important that Magnolia provide The Agency Group shareholders with sufficient information about the bid, including in particular the source and availability of funding to effect the bid.” 

The Takeovers Panel responded in turn, making interim orders that required The Agency push back its AGM from its original 23 December 2020 date until 30 December 2020 at the earliest, provided shareholders were given a response from Nexia to a Magnolia-directed report three days prior.  

The panel also provided the summary of said report tabled by a third party.

The report had been prepared at the direction of Magnolia, and disputed the validity of the original Nexia report that had recommended the Peters Proposal be accepted by shareholders.

Some of the arguments contained in the third-party report can be found here

Magnolia then released its bidder’s statement on 4 January 2021 which contained the information regarding an offer of 4.0 cents per share to shareholders. 

In that letter, Magnolia said there were “a number of important reasons” as to why its offer should be accepted.

On 6 January 2021, The Agency’s AGM was finally held.

Despite Magnolia’s efforts, shareholders resolved to pass the Peters Proposal at the AGM, paving the way for the future strategy of the company to play out. 

This led The Agency to move ahead with the issuance of $5 million worth of convertible notes to Peters Investments, in line with the proposal.  

After the AGM, Mr Atkins expressed that he had “real questions” as to the valid adoption of the resolution. He argued that while the Takeovers Panel was still considering issues as to the validity of independent reports, The Agency Group could not go ahead with its issuance of securities alongside the Peters Proposal vote.

At the time, Mr Atkins said the issue of the relevant securities seemed a deliberate act to attempt to pre-empt any Panel decision by “scrambling the eggs” and confusing the factual matters before the Panel could make its orders.


Magnolia Capital first aligned itself with The Agency Group back in July 2019, when it injected $3.5 million into the business to hold 17.9 per cent of the company: $2.9 million made up a shortfall in a planned raising, while $600,000 was for new shares. The deal also gave Mitchell Atkins the opportunity to join the board as a non-executive director.

Magnolia’s participation was part of an overall $5.6 million fundraising activity — and came after The Agency reported a capital deficit of $6.6 million in December 2018, which the group had explained was a result of one-off costs associated with buying Top Level Real Estate.

REB recaps: What we know about The Agency v Magnolia
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