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Rediff.com  » Business » Hiranandani's problems mount as merger plan falls flat

Hiranandani's problems mount as merger plan falls flat

Last updated on: January 05, 2009 09:52 IST

Real estate developer Niranjan Hiranandani's problems at the London Alternative Investment Market are increasing. The valuer of his Panvel and Chennai projects, which are proposed to be acquired by its AIM-listed fund Hirco, has said that the valuation is dated.

Also, angry shareholders could come together to oppose the proposed reverse merger.

Speaking to Business Standard, a spokesperson for Jones Lang Lasalle Meghraj, the valuer, said, "We stand by the valuation done on September 30.

"However, the market has changed significantly since then."

In fact, JLLM has introduced a new clause in their valuation reports recently that states 'due to the high volatility in the market, we can only stand by the valuation on a particular date. Properties should be valued on a regular basis to get the correct picture'.

Though Hiranandani refused to comment on the issue, sources close to the management said that 90 per cent of the shareholders are supporting the reverse merger.

However, this claim is contested by at least one major shareholder. Andrew Pegge, CEO of Laxey Partners, which holds 10.3 per cent stake in the real estate fund, said, "We have good reason to believe that other shareholders are equally angry about the company's proposals."

Other leading shareholders in the company include Standard Life and HSBC Holding, which hold 13.11 per cent and 10.13 per cent, respectively. Laxey Partners has already sent a letter to other shareholders on December 30 and has lodged an official complaint with the exchange.

"We approached the company well before their announcement to suggest that we work together to close the discount to net asset value. No reference was made during those discussions to the merger,'' Pegge said.

Though the company has not completely ruled out a collaborative approach, Colin Kingsnorth, non-executive director, Laxey Partners, added, " We are still meeting the company. But we are certainly very disappointed with their approach and wonder if the current board is really the right make-up to take the company forward."

On December 18, Hirco board approved the acquisition of two special purpose vehicles of the Hiranandani family, which is developing two townships at Panvel near Mumbai and Chennai.

In response, Laxey Partners issued a letter to the other shareholders claiming that the proposals dramatically reduce the net asset value of Hirco shares and reduce chances of cash distributions in the future.

Also, it said that no valuations have been provided.

Hiranandani has only provided accounts that the company has lost money every year and required a cash injection every year.

The letter also claimed that Hiranandani will gain de facto control of the company without paying a control premium, and will be able to control its business on an ongoing basis despite the views of other shareholders.

Hirco has called an extraordinary general body meeting on January 16 to enable its shareholders to vote on the restructuring proposal. The roadshow will begin next week.

Joydeep Ghosh & Raghavendra Kamath in Mumbai
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