Monday, September 13, 2010

Allied Farmers: Hanover & Allied close mates

It is funny what you find when you are googling. While searching Allied Farmers Ltd [ALF.NZX] after their late night profit announcement for 2010 out last Friday, I came across this little gem published in April 2007 on the IRG website:

Allied Farmers (ALF) is being transformed from a livestock and rural services company into a major player in finance. Initially its finance arm aimed to service farmers requiring finance in their farming activity. But with the agreement this week to acquire 100% of the shares in Nationwide Finance for $33m, Allied becomes a major player in the field. Nationwide Finance Limited, part of the Hanover Group, is a diversified finance company providing property and commercial finance. It has total assets of approximately $160m, which will be added to Allied’s current finance subsidiary, Allied Prime Finance to give it scale needed to operate successfully in the finance industry. Finance should offset some of the risks inherent in livestock trading and other rural activities.

The thing is, after the receivership of Allied Nationwide Finance (it changed it name to this after the 2007 purchase and its folding into Allied Prime, Allied's own finance company) on the 23 August 2010, it doesn't appear that many knew that Nationwide had a previous connection to Hanover. The much written about purchase of the failed Hanover Groups assets late in 2009 by Allied Farmers seem to have swallowed all the detail in its wake.

Allied Farmers soon retiring CEO Rob Alloway seems to have had a cosy relationship with directors at Hanover over a number of years and you cant tell me that the fate of Nationwide wasn't obvious before Rob and his fellow directors at Allied Farmers bought Hanover's whole kit and caboodle last December.

In 2004 Deborah Hill Cone wrote a very good piece on Hanover as a whole. In it she describes not only the dubious nature of the majority of Hanover's financial health (it had a credit rating below BBB, junk bond status) lending (inter-party stuff) but specifically on Nationwide Finance:

"... related party transactions and Nationwide Finance's reveal a further $13.8 million.

I initially understood that the December purchase (and the previous months of negotiation) was the first connection to Hanover with Allied Farmers but to find that their relationship goes back almost 3 years before that gets me thinking about all the back slapping and secret deals that must have gone on over the years.

Mr Alloway has mislead Hanover investors (and has done so subsequently several times) and his own Allied Farmers investors pre Hanover over the value of Hanover assets and his long term involvement with Hanover makes the December purchase look even murkier.

Is it a case of mates helping out mates?

Allied Farmers @ Share Investor

Long Term View: Allied Farmers Ltd
Allied Farmers: Rights Issue Decision
Allied Farmers: Prosecutions should be on the cards
Allied Farmers Fraud passes with little fanfare
Allied Farmers: What's it Worth?
Hanover, Allied Farmers deal more of the same

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