HFA confirms merger talks

HFA Holdings (HFA) has confirmed it is in discussions with a United States fund manager with a view to a possible merger.

The fund manager said no definite terms have been agreed and the board believes it is premature to say how, if and when an agreement might be concluded.

HFA said so far examining a possible merger amounted to $2.7 million (at December 2006).

However, the board of HFA has received an indemnity offer from its major shareholder, MFS, to reimburse HFA for up to $5 million of these expenses if the merger is not agreed to and approved by December 31, 2007.

MFS is seeking an opportunity for a partial (50 per cent) release of its escrow arrangements in consideration for its indemnity. The MFS escrowed shares represent approximately 38 per cent of the total HFA shares on issue.

MFS owns 78,124,516 shares in HFA, of which 78,076,173 shares are currently subject to escrow until April 2008.

The board of HFA has reached an agreement with MFS that it will release from escrow 50 per cent or 39,038,087 shares owned by MFS.

MFS has proposed that its remaining escrowed HFA shares will remain subject to escrow on the current terms until April 2008 and that MFS will continue supporting merger negotiations. It is also anticipated that MFS will seek to sell down some or all of the shares released from escrow.

MFS has advised the HFA board that any such sale would be conducted with a focus on institutional investors and the objective of achieving greater diversity across the HFA register. It is the intention of the HFA staff to sell down all of the released shares in the coming months.

MFS is a funds management and investment company engaged in a diverse range of investment and financing activity throughout Australia and New Zealand. It is HFA’s major stakeholder.