investors hope to round up the cows

http://www.theaustralian.news.com.au/business/story/0,,25553214-5018010,00.html?from=public_rss


Anthony Klan | May 29, 2009
Article from: The Australian
MORE than 3000 investors in the failed Great Southern agribusiness empire who were given now-worthless shares in the group in exchange for $88 million worth of cattle, could get their cows back.

Litigation funding giant IMF said Great Southern's "Project Transform" -- completed less than four months before the group collapsed -- was void because many investors had not approved the swap.

"A major issue we are looking at is how one minute people were standing there with interests in cattle and the next they had shares in Great Southern," said IMF director Hugh McLernon.

"This deal came along when Great Southern couldn't raise any further capital, they couldn't obtain debt and their ability to sell managed investment schemes was severely curtailed."

Under the deal -- which was a flashpoint among investors at Great Southern's first creditors meeting on Wednesday -- about 3300 investors in two cattle schemes were asked by the group to vote to transfer the cattle for shares.

That deal was approved by investors at a meeting in January but Mr McLernon said it only proceeded after an 11th-hour amendment to the constitutions of the schemes which watered down the rights of investors.

At the same meeting at which investors voted on the proposal, they were also asked to vote for an amendment requiring only 75 per cent of investors to pass the deal, rather than 100 per cent.

"The amendment effectively meant that Great Southern could force up to 25 per cent of the cattle owners to sell against their will," Mr McLernon said.

"I have met with numerous investors who have no idea how they came to lose their interest in the cattle."

The proposal was narrowly accepted by investors of both schemes.

Of the investors in the 2006 Beef Cattle Project, 75.8 per cent of those who voted approved the deal.

The transfer was supported by 77.3 per of voting investors in the 2007 Beef Cattle Project.

Only 34 per cent of investors in the 2006 scheme, and 39 per cent of investors in the 2007 scheme, voted in favour.

The remainder either voted against the Project Transform proposal or did not vote at all.

Mr McLernon said he intended to launch a class action on behalf of Great Southern investors who were caught up in the transfer.

"Investors need to say to the administrators, we will give you these crappy shares back and you give us our cows back," Mr McLernon said.

Fronting Great Southern's first creditors meeting, administrator Martin Jones of Ferrier Hodgson said the group would launch an investigation into Project Transform.

Ferrier Hodgson would also review the role of KPMG, which had prepared an "independent expert's report" supporting the deal.

"We have started an investigation of the offer and all of the advisers' roles and will make a thorough examination and report on that," Mr Jones said.

The administrator declined to comment further on Project Transform yesterday.

Mr McLernon said a 1995 High Court decision in a case between an investor and industrial group IEL had dealt with the forced sale of assets in similar circumstances.

He said Great Southern's lenders were expected to contest any action.