QVT Financial Opposes Hirco Resolutions
NEW YORK, Jan. 5 /PRNewswire-AsiaNet/ --
- Troubled by Timing and Location of Hirco Extraordinary General Meeting
In response to the recent actions of Hirco Plc management, QVT Financial
LP issued the following statement:
QVT Financial LP ("QVT"), on behalf of its client funds, strenuously
opposes the resolutions (the "Resolutions") proposed for the extraordinary
general meeting (the "EGM") of Hirco Plc (the "Company") to be held on
January 16, 2009, in Mumbai.
QVT believes that the Resolutions are economically damaging to
shareholders, dilute shareholder voting power, and may remove the Company
from regulatory oversight. At the same time, the Resolutions are favorable to
the Company's management, namely the Hiranandani Group, which stands to reap
both a financial windfall and voting control of the Company, to the concern
of QVT. QVT is also troubled that the timing and remote location of the EGM
may disenfranchise shareholders.
The financial terms of the proposed resolutions are in QVT's view
extremely detrimental to shareholders as they both eliminate the preferred
position of the shareholders and appear to commit shareholders to over-pay
the Hiranandani Group for its interests in the Company's investments.
Shareholders are currently entitled to receive their full cost basis plus a
12% compounding dividend before the Hiranandani Group is to receive any
proceeds distributed from its interests in any Company investment.
The resolutions will cause the shareholders to immediately pay the
Hiranandani Group for such interests, eliminating shareholders' preferred
distribution rights. Furthermore, shareholders will be required to purchase
the Hiranandani Group's interests at a price not specified in the circular
but implied from statements made in that document, that is approximately 8
times greater than the Company's current share price, thus diluting share
value by up to approximately 50%.
The Resolutions dilute the voting power of shareholders and may remove
the company from regulatory oversight. If the Resolutions pass, The
Hiranandani Group would receive control of 46-50% of the Company's shares,
thereby almost eliminating the independent shareholders' ability to enforce
accountability of the Board.
The Resolutions may also reduce regulatory oversight of the Company: as a
risk factor in the circular suggests, should the proposal pass, the Company
may no longer fall under the domain of the UK Takeover Code. If this were to
occur, the Hiranandani Group would not be obligated to make a mandatory offer
to all shareholders should it buy additional shares of the Company, thus
further reducing independent shareholders' voting power and eliminating a
protection that is currently afforded to shareholders.
Finally, QVT also finds the circumstances under which the EGM has been
called to be deeply troubling. The Company convened the EGM on December 19,
over the US and European holiday period, even though the proposals are not
time sensitive in QVT's view. QVT understands that the Company scheduled its
investor presentation road show between January 5 and 7, merely 10 days prior
to the EGM, which as a practical matter affords shareholders little or no
time to consider the resolutions and submit their votes; in fact, the proxy
voting deadline set by QVT's prime broker of January 2nd will have already
passed.
Furthermore, the Company chose the location of the EGM to be Mumbai, even
though the last AGM was held in the Isle of Man (where the Company is
domiciled), and despite the fact that most of the shareholders appear to be
located in Europe and the United States. In addition, to QVT's knowledge, the
Company did not consult with any shareholders in advance of the publication
of the circular, even though such consultations are commonplace, especially
for proposals that completely restructure the company. QVT believes that if
the shareholders were offered a longer notice period or if the EGM were held
at a different time or in the Isle of Man, the resolutions would likely be
defeated. QVT is therefore deeply concerned that the timing and location of
the EGM may have the effect of discouraging shareholder voting.
QVT notes that according to the Economic Times, "a person close to the
Hiranandani Group" has claimed that "...about 90% of [shareholders] are
supporting the proposal." However, QVT has discussed the Resolutions with
shareholders representing over 50% of the Company's outstanding shares, and
not a single shareholder expressed support for the Resolutions. QVT therefore
does not understand on what basis the statement quoted above could have been
made.
QVT is concerned that by proposing these Resolutions and convening the
EGM, the Company's Board has failed its fiduciary responsibilities to its
shareholders and is attempting to facilitate the transfer of value from the
Company's shareholders to the Hiranandani Group. We urge the Board to
reconsider its position with respect to the Resolutions.
QVT urges all shareholders to vote against the Resolutions and demand
satisfactory corporate governance.
SOURCE: QVT Financial LP
CONTACT:Shawn Pattison or Patrick Clifford
both of The Abernathy MacGregor Group
+1-212-371-5999
for QVT Financial LP
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