Takeover may cost Hawkins a 33pc premium

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Allan Hawkins, the former head of Equiticorp who was jailed in the 1990s for his role in the so-called "H-fee" scheme, may have to pay a premium of about 33 per cent to take over Cynotech Holdings Ltd.

That is according to Phil Briggs, whose family owns about 17 per cent of the finance, icecream-cone and satellite phone group and is the largest single shareholder.

Privatisation makes sense, Briggs says, because negative publicity around Hawkins has meant the sharemarket listing hasn't really worked.

An offer may be pitched at 18 cents to 20c, in line with an independent company valuation last year, he said.

"Obviously, it would depend on the terms and whether the offer's cash or funny money, but I've never turned a profit down," said Briggs, an investment adviser.

Cynotech's stock soared about 32 per cent after Hawkins this week announced he would make a formal takeover next month through his private investment company Cynotech Securities Group, which owns about 10 per cent. Total Hawkins family interests make up closer to 23 per cent of the company.

The holdings of Hawkins' family interests climbed over 20 per cent last year, prompting the company to commission a valuation from advisory firm Staples Rodway. The report released in December 2008 valued the company at between 18c and 25c a share.

The company grew out of Rocom Wireless, and Hawkins got involved in 2004 when he helped capitalise its newly established finance unit. About two-thirds of the company's revenue comes from lending on cars, property and mortgages.

Since Hawkins got involved, the shares have climbed from about 6.1c to as high as 32.3c in November 2004, and were at 15c this week.

Briggs speculated that Hawkins wants to take over the company because it is still looking cheap, even though value has been added in recent times.

Tony Falkenstein, another minority shareholder, said a takeover might be "sensible" given the current share price, but he wanted to see the formal offer before committing.

Briggs said Hawkins had always been "generous with his dividends and issues", which should act as a sweetener to investors, although he expects it might be a tougher sell to those shareholders who bought in at about 20 cents.

Hawkins declined to offer further details about the takeover notice, saying he "had to inform the market that there's something going on" and would prefer to wait until it was actually out before he divulged more information.

He was on track to make a formal announcement about December 10.

Cynotech boosted its profit to $1.3 million in the six months through June from $1.2m a year earlier, after repayments from the loan books it bought from Western Bay Finance and National Finance 2000 began to trickle in.

In August, Hawkins took a spray at his finance company rivals, saying many of them didn't make adequate provisioning for bad loans, and he predicted more will have to revisit their moratoriums. Last week, Hanover Finance had to downgrade its promise to return all funds to investors, while earlier this month, St Laurence negotiated a reprieve from the threat of receivership by accepting tough conditions from its trustee.

Briggs said Hawkins had done well with the business and picked up "a couple of bargains" in buying the two loan books. There won't be too many more cheap deals to be had, as "everybody wants them now", he said.

Cynotech faces prosecution by the Commerce Commission over the charging of interest and fees on its Budget Loans unit, and regarding certain credit fees charged on loans it acquired from National Finance.

-BUSINESSWIRE