Troubled property funds manager, MFS Ltd said it is in detailed discussions with a preferred party interested in acquiring a substantial interest in its Stella travel services business.
The proposal comes following last week's 70 per cent drop in shares when it announced it would spin off the Stella interest in an effort to pay off $550 million in debt.
"Given the proposals received and the market reaction to aspects of the demerger proposal announced on Friday 18 January, MFS has decided to not continue with the structural separation of Stella from the financial services business in the form proposed," the company said in a statement.
In a further effort to appease investors, MFS, ousted its chief executive Michael King earlier in the week, naming former deputy Craig White as its new boss.
The company says it is currently in detailed discussions with a preferred party interested in acquiring a substantial interest in Stella and was aiming to reach an agreement within the next two weeks.
MFS also clarified its debt position and said the proceeds of any transaction would not only result in full repayment of all short term maturing debt facilities, but strengthen the financial position of MFS.
According to the company's announcement to the Australian stock exchange on Wednesday, the entire MFS Group has total debt of $1.687 billion.
This includes $1.055 billion in secured term debt, $189 million in asset-backed facilities and $443 million in unsecured notes.
MFS said $220 million of the debt was due in under three months. Another $119 million is due in one to three years.
According to Shaw Stockbroking analyst, Brent Mitchell, the company has had a number of approaches and that one suitor is likely to be US private equity fund, CVC Asia Pacific.
"They have had approaches from them and third parties," Mr Mitchell said. "It is not surprising as Stella has good assets.
"There is still some value left in MFS and such an action would support the balance sheet. CVC are one party in there and have already done significant due diligence last year over four or five months."
MFS said at this stage, the proposals received were conditional on limited further due diligence and satisfaction of any necessary regulatory approvals.
The company said it had requested that its shares continue to be suspended on the Australian Securities Exchange following this weeks earlier halt, while it considers offers.
"MFS will continue to keep shareholders informed of any significant developments," the company said.
Securities in MFS Diversified Group fell sharply on Wednesday after it released an announcement clarifying its relationship with MFS Ltd.
MFS holds a 16.9 per cent stake in the fund, the announcement said.
MFS Diversified Group shares fell 11 cents, or 15.71 per cent, to 59 cents by 1112 AEDT.
Another entity related to MFS, MFS Living & Leisure Group, was placed in a trading halt Wednesday morning.
MFS
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