Allied Farmers plans 1-100 share consolidation

Allied Farmers is planning a 1-for-100 share consolidation to pare back its register bloated by its ill-fated Hanover transaction.

The company says the consolidation will take effect from 5pm on November 15, but the exact number of shares left over won't be known until after that date.

That’s because the consolidation is complicated by a simultaneous conversion of capital notes into ordinary shares and further shares being issued to investors who participated in a private placement last August and to the original Allied Farmers shareholders.

Allied Farmers currently has 2.04 billion shares on issue, having issued 1.9 billion to former Hanover and United Finance investors in December 2009.

Those shares, issued at 21c each, are now worth just 0.3c. The company posted a $41 million loss for the year to June 2011 but its auditor PwC couldn't give an unqualified opinion on the accounts amid concerns over the company's going concern status.

As part of the Hanover deal Allied gave its own shareholders a bonus share reset mechanism to “protect” them from downside to the deal if the assets acquired were written down below the $396 million ascribed at the time.



Those assets have since been revalued at less than $90 million.



As a result of the updated valuations Allied will issue 118.09 million new shares to its original shareholders.



Further to that, under a price adjustment right (PAR), the company also has an obligation to issue 977.34 million additional shares to institutional investors who took part in a share placement in August 2010.


Under listing rules Allied can only issue 390.5 million (equivalent to 20% of the shares on issue) without shareholder approval.

However, with the pending conversion of 12.6 million of capital notes into ordinary shares, Allied believes it can sidestep any shareholder approval.

The company has released a formula for converting the capital notes in accordance with the trust deed, but much depends on the number of shares on issue on November 15 and the 20-day average share price at that time.

While the share consolidation will reduce the number of shares owned by shareholders by a factor of 100, it will not impact relative percentage shareholdings in the company.

However, the issue of new shares to placement holders under the PAR agreement will cause a significant dilution to the ex Hanover investors’ holdings.