Laxey Partners, an activist hedge fund, has received a set back in its attempt to oust the existing management of Alternative Investment Market (AIM) listed Hirco Plc after UK's Standard Life Investments opposed the move.
Standard Life, which owns 13.7 per cent in Hirco, the investment vehicle of Mumbai-based Hiranandani family, has said that Laxey's move to destabilise the existing management will harm the interest of the shareholders and hurt returns of the fund. ''We are concerned that such changes would lead to potential conflict in the joint ventures between Hirco, Hiranandani and the investment companies which manage the development projects, and would ultimately lead to diminution of value for Hirco shareholders,'' Standard Life Investments, said in a statement.
An extraordinary generalbody meeting is scheduled to be held on May 6 to resolve the dispute between Hirco management and warring shareholders. Laxey, which holds over 10 per cent stake in Hirco, on February 20 called for an EGM to oust three directors of Hirco including chairman Niranjan Hiranandani and replacing them with its own while Hiranandani camp, which owns a majority stake, has threatened to pull out the entire board if any of its directors are ousted. Laxey also demanded that Hirco name a chairman who was independent of the Hiranandani family. Standard Life in its statement said that a merger between Hiranandanis and Hirco on revised commercial and corporate governance terms remains the best way forward to enhance shareholder value. "We were concerned that the previous merger proposal was dilutive for existing shareholders and believed the payment by Hirco for a new exclusivity agreement with Hiranandani, which we estimated as amounting to £100 million consideration, was excessive and not supported by a fully independent valuation,'' it said in the statement.
History of the case
In December last year, Hirco proposed a reverse merger of Hiranandani realty projects with itself to become a integrated development company from a investment company, by taking direct control over the Hiranandani projects in Panvel and Chennai where it had invested.
Hirco was forced to abandon its plans following a backlash among investors led by Laxey which described the proposal as "shocking and ill-conceived". Hirco claimed support of 90 per cent of the shareholders for the move. After Hirco’s board approved the merger of the two development companies of the Hiranandani group, Laxey came out with a letter that said: “No valuations for the loss-making developer, Hirco Developments, have been provided, only accounts that show it has lost money every year and has required a cash injection every year from Hiranandani.”
