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An ASX announcement from The Agency Group Australia has called out Magnolia for its “proposal to make an unsolicited, conditional offer” for a controlling share in the real estate company.
REB first reported on Magnolia’s intention to make a cash takeover bid for 100 per cent of the fully paid ordinary shares of The Agency Group on Monday, 7 December.
Acknowledging first that Magnolia Equities III Pty Ltd is associated with The Agency ex-director and significant shareholder, Mitchell Atkins, the “receipt of letter” ASX announcement flagged that “no formal bid for the company has been received”.
“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,” it outlined.
The board indicated that shareholder approval for the Peters Investments Pty Ltd proposal would still be sought on 23 December 2020 at The Agency’s annual general meeting.
Reiterating that no formal bid had been received by The Agency and that there is no guarantee any bid would be made, the ASX announcement criticised the unclear, conflicting and confusing nature of the “proposal” — as well as took concern with Magnolia’s ability to raise the cash required to fund any takeover attempt.
The board also flagged that the copy of the Magnolia letter was sent to media outlets “without the knowledge and consent of the company”.
In total, six reasons for the board’s concerns surrounding the initial letter were given in the statement, which REB has outlined below:
- The proposal includes conflicting and confusing statements, including reference to a “scrip takeover bid” and a “cash takeover bid”.
- The identity of the proposal bidder is unclear — calling it “a fundamental omission”, the board pointed out that the letter refers to “Magnolia Equities III Pty Limited, or an entity nominated by it”.
- If Magnolia is to be the bidder, the board said it “is sceptical of Magnolia’s ability to raise the cash required in order to fund a takeover bid for 100 per cent of all the ordinary shares on issue by The Agency”. The statement went on to say that this is assuming that “it is, in fact, a cash offer”. The company has taken issue also with the fact that no details of the funding for the proposal have been provided by Magnolia.
- The proposal states that “the bid and Magnolia’s obligation to make the bid is subject to a range of conditions”, but The Agency’s board iterated that it isn’t clear from the proposal what conditions must be satisfied prior to an offer being made and what conditions any takeover bid will be subject to.
- The proposed “takeover” price of 4 cents per share is based on the high fair value “on a minority basis”, but the board stated that based on Nexia’s IER, the directors would be unable to recommend a takeover bid at this price, given the proposal is for a “controlling interest in The Agency”.
- The proposal is priced at a discount to the current share price of the company which stood at $0.05 at closing on Friday, 4 December 2020.
On the basis that there is no guarantee a bid would actually be made, The Agency’s board has advised shareholders to take no action in relation to the proposal, or any document received from Magnolia in relation to the proposal, until they receive the directors’ formal recommendation.
The board said it would keep shareholders fully informed of further developments as they occur.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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