By Fiona Rotherham
An independent adviser's report gives the thumbs up to a proposed backdoor listing of a company owned by Wellington property developers and brothel owners John and Michael Chow despite existing shareholders of the shell company RIS Group being heavily diluted and debt increasing substantially.
NZAX-listed RIS Group has agreed to accept a conditional offer from trusts associated with the Chows which would see it buy the shares in the brother's 16 Park Avenue company, a South Auckland provider of long and short-stay accommodation, for about $7.5 million.
The company today released a disclosure document and independent adviser's report on the deal prior to a shareholders vote on Feb. 24 in Auckland.
The independent adviser's report from Campbell MacPherson said the proposed transaction had benefits to RIS shareholders because the shell company had limited alternative courses of action and its directors don't consider its current operating and financial position to be sustainable. It has minimal net tangible assets, no material revenue, and its shares are traded infrequently.
Under the deal RIS will enter into a five-year contract for services with Chow Group Management Ltd worth $150,000 per annum or 1 percent of the value of the property portfolio, which Campbell MacPherson said was on attractive terms.
RIS shares were valued by the independent adviser pre-acquisition in a range of 39 cents to 49 cents, including $300,000 ascribed to the worth of its NZAX listing.
The independent adviser said negatives of the deal include existing RIS shareholders being diluted by a factor of about 19.5 times, meaning a 10 percent shareholder would shrink to just 0.51 percent after the deal.
RIS chairman Roger Bennett said the directors are recommending shareholders vote in favour of the transaction as it will move RIS from being a shell to immediately becoming an active trading company.