Finsure merger a ‘dilutive proposal’ for shareholders

Lawyers representing non-bank lender Firstmac have warned that if the proposed merger between Finsure and ASX-listed ADI Goldfields Money goes ahead, it will leave shareholders with a “significantly diluted” investment.

In a letter to Goldfields Money on 27 November, Firstmac lawyers King & Wood Mallesons confirmed no extension to a takeover bid to acquire the ADI.

“Following the announcement made by Goldfields Money on 23 November 2017 in relation to the highly conditional, uncertain and dilutive proposal with Finsure, Firstmac Holdings has elected not to extend its offer,” the lawyers said.

The letter lists a range of potential roadblocks to the proposed merger, including regulatory approvals, shareholder approval and an independent expert to determine that the deal is fair and reasonable to Goldfields Money shareholders.

“Given the highly conditional nature of the Finsure Proposal, it is uncertain whether it will proceed (and, if so, when),” the letter reads.

It goes on to warn that Goldfields Money shareholders “will not receive any cash value” for their shares under the Finsure Proposal.

“If the Finsure Proposal proceeds, Goldfields Money shareholders will have their shareholdings significantly diluted.”

At the time of writing, which was three days before Firstmac’s takeover bid expired, the non-bank’s lawyers stated that the bid to acquire the ADI for $1.27 cash per share was “the only offer available” to Goldfields Money shareholders to realise certain cash value for their shares.

The lawyers warned that Goldfields Money’s share price may fall once the Firstmac offer closed on 1 December.

Goldfields Money shares were trading at $1.32 when the market closed on Tuesday (5 December), down from the 52-week high of $1.45 achieved when the market opened on 1 December.

Goldfields Money announced on 23 November that it had signed an agreement with Finsure.

The directors of Goldfields Money believe that the deal will be “transformational” for the bank and, if implemented, will deliver substantial value for shareholders.

The Process Agreement outlines the key commercial terms of a proposal, under which Goldfields Money will merge with Finsure by acquiring 100 percent of the diluted shares in Finsure via the issue of Goldfields Money shares.

Goldfields Money shares will be valued in the transaction at $1.50 per share, well above Firstmac’s bid of $1.12 a share earlier this month and beating the non-bank lender’s second bid of $1.27 a share. Goldfields recommended shareholders reject Firstmac’s takeover offer. The non-bank’s founder and main shareholder, Kim Cannon, has made no secret about Firstmac’s desire to obtain a banking licence.

If implemented, the merger will see Goldfields Money issue 40,750,000 shares to Finsure shareholders, comprising approximately 63 per cent of Goldfields Money on a diluted basis including Goldfields Money Performance Rights.

The new shares will be issued at $1.50 per share, valuing Finsure’s equity at around $61.1 million and the merged group at around $97.5 million.

[Related: Firstmac, Finsure and the penny stock from Kalgoorlie]

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