Kupe puts bite on Judge Corp.

Press, 21 November 1987, Page 27

Kupe puts bite on Judge Corp.

Judge Corporation is facing further large unrealised losses after Kupe Group yesterday exercised a put option on shares in Ariadne Australia. The option requires Judge Corporation to buy for cash from Kupe 13.61 million shares in Ariadne at the price paid by Kupe. Based on market values on Wednesday (Aust 65c), Judge faces a paper (unrealised) loss of SNZ36.4M. A put option is a right to sell. The Kupe directors announced the exercise of the option yesterday, after a meeting. They also said that Kupe had retained its financial viability, in spite of the big drop in share prices. Kupe, which is a subsidiary of Judge, took the move to recoup part of its $89.3M unrealised losses in the sharemarket crash. The Kupe directors said the option could be exercised up to April 8. Kupe bought the Ariadne shares for sAust4l.2M. The directors said they were determined to max-’ imise the value of the option in spite of earlier deciding that its exercise could “destabilise” Judge Corporation negotiations with associates. The sharemarket crash had dealt more severely with the Judge group of companies, and this had impacted on share investments held by Kupe. The table shows the market value of shares held on November 8. The directors unanimously felt the Judge shareholding in Kupe should now be sold to “a major company whose aims and objectives would be compatible with those of Kupe, Group and this view has been communicated to Judge Corporation.” Major companies had shown “keen interest” in picking up that shareholding. The directors said they had been in close contact

with the task force overseeing the restructure of Judge Corporation. Should Judge Corporation default in meeting the payment on the Ariadne shares due on December 4, Kupe would sell them and become an unsecured creditor of Judge for the shortfall. Reviewing Kupe’s current position, they said the value received from the Ariadne holding would help revive a net tangible asset backing on Kupe ■shares knocked down by the sharemarket crash. The Ariadne holding could add up to 27c to the asset backing after the share portfolio losses meant it was rut from a net tangible asset backing (at book value) per share on August 31 of 186 c a share. "On a comparable basis,

and allowing for the loss on share investments if sold at market value, shareholders’ funds would total $156.86M, representing a net tangible asset backing of 116 c a share,” the directors said. The 116 c was before valuations on Kupe’s property developments. Independent valuations of Kupe’s two main projects, now in the advanced stages of negotiations, would raise the asset backing to 140 c a share, the Kupe directors said. Of the unrealised losses, the directors said Kupe was under no pressure to sell any shares at the present depressed prices. "Current assets still significantly exceeed current liabilities.” In spite of the magnitude of the potential losses should the share portfolio be sold, Kupe Group was a viable company with some of the most prestigious property development

projects in New Zealand. It had ownership of the sites for these projects, the report said.

The Kupe report also set out what occurred after Judge had increased its hold-, ing in Kupe to 50.2 per cent, when an indication was given of a full take-over for the rest of the shares.

The delays in implementing the take-over were ascribed to planning decisions on the ultimate form of the grouping of companies to be involved, the directors said.

A request by Kupe’s chairman, Mr Peter Grayburn, that two additional directors not connected to Judge Corporation be appointed, were rejected on the grounds of imminent take-over.

On the initiatives of Judge investments were made by Kupe in Judge-related companies. At the time there was some logic in these investments, they said. “As delays occurred in making a take-over offer to the minority shareholders in Kupe, and as the scale of the investments grew, the chairman became increasingly concerned, and in the case of the final major transaction, insisted on and obtained a put option to Judge Corporation," the report said.

Shares Cost Current Unreal. Company held $ mkt $ loss Judge Corp. (1) 3.04M 12.49M 0.82M 11.67M Renouf Corp. 6.95M 19.92M 4.03M 15.89M Ariadne Aust. 20.73M 67.36M 15.14M 52.22M Non-Judge related firms (2) 9.51M Total loss 89.29M (1) Includes IM shares bought in 1986 float. (2) Includes share residue from Apex portfolio.