Bidder's Statement
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Direct: +61 418 717 001
ASX E: trevor.withane@blackwattlelegal.com.au
Level 40, Central Park
152-158 St George's Terrace
Perth WA 6000
BY EMAIL ONLY: Sandra.Wutete@asx.com.au; wade.baggott@asx.com.au; listings@asx.com.au
4 January 2021
FOR IMMEDIATE RELEASE TO THE MARKET
Dear Sirs
Bidder’s Statement – Magnolia Equities III Pty Ltd’s all cash takeover bid for all shares in The Agency
Group Australia Limited
We act for Magnolia Equities III Pty Ltd ACN 634 968 657 (Magnolia).
We attach, by way of service pursuant to item 5 of section 633(1) of the Corporations Act
2001 (Cth) (Act), a copy of Magnolia’s bidder’s statement (Bidder’s Statement) in relation to its off-market
takeover bid for all of the ordinary shares in The Agency Group Australia Ltd ACN 118 913 232 (ASX:AU1)
(AU1).
The Bidder’s Statement was lodged with the Australian Securities and Investments Commission last night,
and served on AU1 in accordance with item 3 of section 633(1) and section 109X(1)(b) of the Act this
morning.
Yours faithfully
Trevor Withane
Partner
Encl.
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
YOU SHOULD READ THIS DOCUMENT IN ITS ENTIRETY. IF YOU ARE IN ANY DOUBT AS TO HOW TO DEAL WITH IT, YOU SHOULD CONSULT YOUR
LEGAL, FINANCIAL OR OTHER PROFESSIONAL ADVISOR AS SOON AS POSSIBLE
BIDDER’S STATEMENT
ACCEPT
THE OFFER
by: Magnolia Equities III Pty Limited (Magnolia) ACN 634 968 657
to purchase: all your ordinary shares in THE AGENCY GROUP AUSTRALIA LIMITED
(ASX:AU1) ABN 52 118 913 232
for a price of: 4.0 Cents cash per AU1 Share
contact: Please contact Magnolia on the AU1 Offer Helpline on 1300 160 792 or email
au1@magnoliacapital.com.au if you require assistance with your acceptance.
LEGAL ADVISER
THE OFFER TO ACQUIRE YOUR AU1 SHARES EXPIRES AT 5:00PM [PERTH] TIME ON
[CLOSE] 2021, UNLESS WITHDRAWN OR EXTENDED
CONTENTS Page ACCEPTANCE
To accept the Offer, you should follow the instructions set out in Section 8.15 of this Bidder's
Important Information And Notices 3 Statement.
Letter From Magnolia 5
Reasons Why You Should Accept The Offer 6 QUESTIONS
Frequently Asked Questions 7 If you have any questions in relation to this document, the Offer or how to accept the Offer,
1. Information concerning AU1 10 please contact your professional advisors.
2. Information On AU1 Securities 26 You may also contact Magnolia on the AU1 Offer Helpline on 1300 160 792 from Monday to
3. Magnolia’s Intentions 31 Friday between 9:00 am and 5:00 pm (Sydney Time) or email Magnolia at
au1@magnoliacapital.com.au.
4. Consideration And Funding 34
5. Profile Of Magnolia 37 KEY CONTACTS
6. Taxation Implications 38
Magnolia Equities III Pty Ltd
7. Additional Information 40
Level 9
8. Terms Of Offer 41 300 George Street
Sydney NSW 2000
9. Glossary And Interpretation 52
www.magnoliacapital.com.au
10. Approval Of Bidder’s Statement 57
Blackwattle Legal
Level 13
111 Elizabeth Street
KEY DATES Sydney NSW 2000
02 8005 3057
Date of announcement of Offer 4 December 2020 www.blackwattlelegal.com.au
Bidder’s Statement lodged with AU1, ASIC and ASX 3 and 4 January 2021
Commencement of Offer Period [Open] 2021
Close of Offer Period (unless extended or withdrawn) 5:00pm (Perth Time) [Close] 2021
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
IMPORTANT INFORMATION AND NOTICES assessing the Offer. The forward-looking statements are based on information available to
Magnolia at the date of this Bidder’s Statement.
(a) Bidder’s Statement
This Bidder’s Statement is given by Magnolia to AU1 under Part 6.5 of the Corporations Act and (d) Investment decisions
relates to the Offer. This Bidder’s Statement is dated 3 January 2021 and a copy was lodged This Bidder’s Statement does not take into account your individual investment objectives,
with ASIC on 3 January 2021. financial situation or particular needs. It is not financial, investment or taxation advice. You
should therefore seek your own financial, investment and taxation advice before deciding
Neither ASIC nor any of its officers takes any responsibility for the contents of this Bidder’s whether or not to accept the Offer.
Statement.
(e) Information on AU1
The Offer relates to all AU1 Shares on issue as at the date of the Bidder’s Statement.
All information in this Bidder’s Statement relating to AU1 has been prepared by Magnolia using
(b) Foreign Jurisdictions information included in public documents filed by AU1 with ASX or ASIC or published by AU1 on
its website. None of the information in this Bidder’s Statement relating to AU1 has been verified
The distribution of this Bidder’s Statement may, in some countries, be restricted by law or by AU1 or its directors or independently verified by Magnolia or its director. Accordingly,
regulation. Accordingly, persons who come into possession of this Bidder’s Statement should subject to the Corporations Act, Magnolia does not make any representation or warranty,
inform themselves of, and observe, those restrictions. express or implied, as to the accuracy or completeness of this information. The information on
AU1 in this Bidder’s Statement should not be considered comprehensive. In addition, the
This Bidder's Statement has been prepared having regard to Australian disclosure requirements, Corporations Act requires the directors of AU1 to provide a Target’s Statement to AU1
which may differ from those of other countries. Shareholders in response to this Bidder’s Statement, setting out certain material information
concerning AU1.
(c) Disclosure regarding forward-looking statements
This Bidder’s Statement includes certain forward-looking statements and statements of current (f) Privacy
intention (which include those in Section 3 (Magnolia’s Intentions)). As such statements relate Magnolia will collect your information from the register of AU1 Shareholders for the purposes
to future matters, they are subject to inherent risks and uncertainties. of making the Offer. The Corporations Act requires the names and addresses of AU1
Shareholders to be held in a public register. Your information may be disclosed on a confidential
These risks and uncertainties include factors and risks specific to the industries in which basis to Magnolia’s related bodies corporate and external service providers, and may be
Magnolia and AU1 operate as well as matters such as general economic conditions, many of required to be disclosed to regulators, such as ASIC.
which are outside the control of Magnolia and its director.
(g) Websites
These factors may cause the actual results, performance or achievements of Magnolia or AU1
to differ, perhaps materially, from the results, performance or achievements expressed or References to AU1's websites (www.theagency.com.au), (investors.theagency.com.au) and
implied by those forecasts or forward-looking statements. Magnolia's website (www.magnoliacapital.com.au) are for your reference only. Information
contained in or otherwise accessible from either website is not incorporated by reference into
The past performance of Magnolia and AU1 is not a guarantee of future performance. this Bidder's Statement.
The forward-looking statements do not constitute a representation that any such matter will be
achieved in the amounts or by the dates indicated and are presented as a guide to assist you in
BIDDER’S STATEMENT |3
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(h) Rounding
A number of figures, amounts, percentages, prices, estimates, calculations of value and
fractions in this Bidder’s Statement are subject to the effect of rounding. Accordingly, the actual
calculation of these figures may differ from the figures set out in this Bidder’s Statement.
(i) Estimates and assumptions
Unless otherwise indicated, all references to estimates, assumptions and derivations of the
same in this Bidder's Statement are references to estimates, assumptions and derivations of the
same by Magnolia management. Management estimates reflect, and are based on, views as at
the date of this Bidder's Statement, and actual facts or outcomes may materially differ from
those estimates or assumptions.
(j) Currencies
In this Bidder's Statement, references to "Australian dollars", "AUD", "$", "A$" or "cents" are to
the lawful currency of Australia.
(k) Defined terms and interpretation
Unless otherwise noted, capitalised terms and certain abbreviations used in this Bidder’s
Statement are defined in the Glossary in Section 9. That Section also sets out certain rules of
interpretation which apply to this Bidder’s Statement.
(l) Appointment of Magnolia as attorney on acceptance of Offer
By accepting the Offer, you irrevocably appoint Magnolia and each of its nominees as your
attorney, with effect from the time on which all the Conditions have been fulfilled or freed, to
exercise all your powers and rights in relation to your AU1 Shares to requisition, convene, attend
and vote at all general meetings of AU1, until such time as AU1 is registered as the holder of
your AU1 Shares.
BIDDER’S STATEMENT |4
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
LETTER FROM MAGNOLIA Magnolia recommends that YOU ACCEPT THE OFFER.
If you have any questions about the Offer, please contact your broker or financial adviser or call
Dear AU1 Shareholder, Magnolia on the AU1 Offer Helpline on 1300 160 792 or email to au1@magnoliacapital.com.au.
We are pleased to enclose this Bidder’s Statement in relation to an Offer from Magnolia Equities Yours faithfully,
III Pty Limited (Magnolia) to acquire all of your ordinary shares in The Agency Group Australia
Ltd (AU1).
Magnolia is offering 4.0 cents for each of your AU1 Shares which Magnolia considers is a
superior alternative to the current Peters Proposal, set out in the Notice of Annual General
Meeting dated 23 November 2020 (and appearing on the ASX MAP on 24 November 2020) and
subsequent announcement(s) because, amongst other things (see also the section below titled Mitchell Atkins
“Reasons Why You Should Accept The Offer”): Sole Director
Magnolia Equities III Pty Limited
1. it represents a premium of 0.7 cents (21%) to the value of your AU1 Shares when
compared with the resulting “preferred” value following the completion of the Peters
Proposal (as estimated by AU1’s independent expert, Nexia);
2. it provides an all cash exit opportunity to shareholders in what would be considered
to be an illiquid market for AU1 Shares; and
3. it provides a realistic means by which shareholders are able to mitigate their exposure
to the serious risks associated with the areas for concern raised by Magnolia in Section
1.7.
For the avoidance of doubt, the Offer is for 100% of your AU1 Shares, although you can accept
for fewer if you want. The Offer does not extend to any AU1 Rights that you may hold.
The Offer is subject to a number of conditions which are set out in Section 8.7.
The Offer will remain open until [Close] 2021, unless extended or withdrawn.
If you wish to accept this Offer please follow the process at Section 8.15.
BIDDER’S STATEMENT |5
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
REASONS WHY YOU SHOULD ACCEPT THE OFFER date of Bidder’s Statement), there is no evidence that suggests there is sufficient buyer
interest to allow you to sell your AU1 Shares at that price or even at the Offer Price.
There are a number of important reasons why you should accept Magnolia’s Offer. These
(3) The provision of cash consideration provides certainty of value for your AU1 Shares in
include:
circumstances where there are real risks inherent with your investment in AU1.
(1) If the Offer is accepted, AU1 Shareholders can expect to receive a 0.7 cents premium
compared to the “preferred” value of their shares if the alternative Peters Proposal is (4) The future of AU1 is highly uncertain given the concerns relating to financial
implemented (as estimated by AU1’s independent expert, Nexia). performance and management, corporate governance, and conflict management of
the current AU1 Board.
Nexia has reported that the value of AU1 Shares, if the Peters Proposal is implemented
is between 2.80 cents and 3.90 cents with a “preferred” value of 3.30 cents. Thus, These concerns are more fully described in Section 1.7 below.
Magnolia is offering you the opportunity to see your AU1 Shares sold for cash at a 21%
premium to that value as summarised below: (5) If the Offer is not accepted, the market price of AU1 Shares may fall.
While there are many factors that will influence the market price of AU1 Shares, in the
AU1 Equity Valuation Comparison Share Price (Cents)
absence of the Offer or a competing bid, it is possible that after the close of the Offer
1. Nexia's Fair value of an AU1 Share on a minority basis 3.30
the AU1 Share price may fall below the value of the Offer, given that the Offer
after the Proposed Peters Transaction
represents a premium to the likely value of AU1 shares should the Peters Proposal
2. Market value of an AU1 Share on a minority basis after the 2.70 proceed.
Proposed Peters Transaction
(6) No brokerage or other sale fees are involved for Accepting AU1 Shareholders.
3. Magnolia Offer Price for 100% of the outstanding AU1 4.00
Shares If your holding of AU1 Shares is an Issuer-Sponsored Holding you will not pay any
brokerage in accepting the offer for the whole or part for your AU1 shares.
Notes:
Magnolia's cash Offer Price of 4 cents per share provides 48.1% premium when compared to (7) You may risk becoming a minority AU1 Shareholder if you do not accept the Offer.
the estimated market value of an AU1 Share after the Proposed Peters Transaction and 21.2%
premium compared to Nexia's preferred valuation of an AU1 Share after the Proposed Peters
Transaction If the Peters Proposal is implemented, Peters will have a controlling interest in AU1 and
Source: Nexia Report (dated 23 November 2020) you will be part of an effective minority, thereby leaving your investment at significant
risk with Company/Board decision making controlled by a single majority shareholder
(2) The Offer represents a sound exit opportunity for shareholders who are not able to and the concerns raised by Magnolia in Section 1.7 will remain unaddressed. You can
otherwise sell their unmarketable parcels of shares in what could be considered to be avoid this by accepting the Offer from Magnolia.
an illiquid market for AU1 shares.
(8) Nexia, AU1’s own independent expert, has concluded that the Peters Proposal is NOT
Nexia’s report of 23 November 2020 demonstrates (see section 5.8 of that report) the FAIR.
very small numbers of AU1 Shares that have been traded on ASX in the last 12 months
ending 30 September 2020. While the last sale price of AU1 Shares is $0.051 (Prior to
BIDDER’S STATEMENT |6
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
FREQUENTLY ASKED QUESTIONS What is this Bidder’s Statement?
This Bidder’s Statement was prepared by Magnolia for distribution to AU1 Shareholders. This
What is the Offer? Bidder’s Statement describes the terms of the Offer for your AU1 Shares and information
relevant to your decision whether or not to accept the Offer. Should you have any doubt as to
Magnolia is making an Offer to acquire all your AU1 Shares. The Offer Price is 4.0 cents cash for how to deal with this document, you should consult your financial, legal or other professional
each AU1 Share. advisors.
What are my choices about the Offer? Who is Magnolia?
You may: Magnolia is a private company ultimately owned by Mr Mitchell Atkins and his wife through a
● accept the Offer for all of your AU1 Shares; family trust. It is managed by Mr Atkins, who is its sole director. More details about Magnolia
and its related companies are contained in Section 5.
● accept the offer for some only of your AU1 Shares;
● retain your AU1 Shares; or What is Magnolia's current interest in AU1 Shares?
● sell your AU1 Shares to another party. Magnolia currently holds 49,763,017 (16.65%) AU1 Shares.
How do I accept the Offer? Who may accept the Offer?
This depends on whether your holding of AU1 Shares is a "CHESS Holding" or an "Issuer- Any person who, during the Offer Period, is capable of transferring good title to a parcel of AU1
Sponsored Holding". Your personalised Acceptance Form sent with this Bidder's Statement Shares that are on issue as at the date of the Bidder’s Statement.
shows which kind of shareholding you have.
If you have accepted another offer to buy your AU1 Shares or have otherwise agreed to sell any
● If your holding of AU1 Shares is a CHESS Holding either: of your AU1 Shares to another person you will not be able to accept the Offer for those AU1
(a) complete, sign and return the Acceptance Form; or Shares, unless you have exercised a right to withdraw that acceptance or agreement.
(b) instruct your Broker to initiate acceptance of the Offer on your behalf,
What if I acquired my AU1 Shares after the Register Date?
in sufficient time for the acceptance to be received and processed before the end of the
Offer Period. You may still sell those AU1 Shares to Magnolia under the Offer provided that they were on
issue on the Register Date, any person who held them on or after the Register Date has not
● If your holding of AU1 Shares is an Issuer-Sponsored Holding, complete, sign and return
accepted the Offer for them and you comply with the acceptance procedures in Section 8.15 by
the Acceptance Form so that it is received before the end of the Offer Period.
the time specified in that Section.
Detailed instructions on how to accept the Offer are set out on the Acceptance Form.
Can I accept the Offer for some only of my AU1 Shares?
What if I don’t accept the Offer?
Yes. If you wish to accept the Offer you may accept for all or some of the AU1 Shares that you
If you don’t accept the Offer you will continue to hold your AU1 Shares unless Magnolia hold.
becomes entitled to compulsorily acquire remaining AU1 Shares under Part 6A.1 of the
Corporations Act.
BIDDER’S STATEMENT |7
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
Are there any conditions of the Offer? When can I accept the Offer?
Yes. The Offer is subject to a number of conditions. The conditions to which the Offer is subject You may accept the Offer at any time from [Open] 2021 until the end of the Offer Period, in
(Conditions) are set out in full in Section 8.7 and include (in summary): accordance with the procedure in Section 8.15.
● 90% acceptance level;
When does the Offer close?
● The Peters Proposal not being approved;
The Offer is scheduled to close at 5:00pm (Sydney time) on [Close] 2021, unless extended or
● AU1’s target statement dealing with certain information issues;
withdrawn in accordance with the Corporations Act.
● No material new transactions;
● Key Persons (as defined in Section 3.2) agreeing to continue with AU1 after the Bid; Can the Offer Period be extended?
● No legal proceedings being threatened or commenced against the AU1 Group involving Yes, Magnolia may extend the Offer Period in accordance with the Corporations Act. If you
a monetary claim of greater than $100,000; remain a AU1 Shareholder and have not already accepted the Offer, Magnolia will give you
notice of any extension as required by the Corporations Act. AU1 Shareholders should not
● No material defects in AU1 filings;
assume that the Offer Period will be extended.
● No rights arising on change of control;
● No break fees or inducements; Will I need to pay brokerage if I accept the Offer?
● No Material Adverse Change occurring in relation to AU1 at any time between the If your AU1 Shares are registered in an Issuer-Sponsored Holding you will not incur any
Announcement Date and the end of the Offer Period; and brokerage fees.
● None of the Prescribed Occurrences occurring between the Announcement Date and If your AU1 Shares are registered in a CHESS Holding, or if you are a beneficial owner whose
the end of the Offer Period. AU1 Shares are registered in the name of a Broker, bank, custodian or other nominee you should
Magnolia will inform AU1 Shareholders by announcement on ASX if Conditions are satisfied or ask your Broker or nominee whether it will charge any transactional fees or service charges in
if it decides to free the Offer from any Conditions. connection with acceptance of the Offer.
If you sell your AU1 Shares on-market during the Offer Period, you may have to pay Broker’s
What happens if the Offer is not freed from any Condition and it is not satisfied? commission or brokerage.
If any Condition is not satisfied and Magnolia does not free the Offer from that Condition by the
end of the Offer Period (or, in the case of the no Prescribed Occurrences condition – by three If I accept the Offer, when will I be paid?
(3) Business Days after the end of the Offer Period) the Offer will lapse. If you have accepted If you accept the Offer, you will be paid the Consideration by the earlier of:
the Offer for some or all of your AU1 Shares and this happens Magnolia will not purchase your
● One month after you have accepted the Offer or, if the Offer is still subject to a
AU1 Shares and all Rights attaching to your AU1 Shares will revert to you.
Condition, within one month after the Offer becomes unconditional; and
Can I withdraw my acceptance? ● 21 days after the end of the Offer Period.
You may only withdraw your acceptance if, after you have accepted the Offer, the Offer remains The Consideration will be paid at the time and in the amount specified in the Offer, set out in
subject to Conditions and Magnolia varies the Offer in a way that postpones the time when it full in Section 8.
has to meet its obligations under the Offer for more than one (1) month.
BIDDER’S STATEMENT |8
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
What are the tax implications of accepting the Offer?
A general description of the Australian taxation treatment for AU1 Shareholders accepting the
Offer is set out in Section 6. You should consult your taxation advisor for detailed taxation
advice before making a decision as to whether or not to accept the Offer for all or any of your
AU1 Shares.
BIDDER’S STATEMENT |9
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
1. INFORMATION CONCERNING AU1 8-Dec-20 42 Receipt of Letter
7-Dec-20 41 Market Announcement
The information in this Section has been prepared based on a review of publicly 24-Nov-20 40 Shareholder letter – AGM
available information including the independent expert reports from Nexia dated 23
24-Nov-20 39 Notice of Annual General Meeting/Proxy Form
November 2020 and 10 December 2020 concerning AU1. It has not been verified and
Magnolia does not make any representation or warranty, express or implied, as to the 4-Nov-20 38 Proposed Issue of Securities
accuracy or completeness of such information. 29-Oct-20 37 Appendix 4C and Quarterly Update
Further information concerning AU1 may be included in its Target’s Statement in 29-Oct-20 36 11m Funding Packages sets foundation for growth
relation to the Offer. 26-Oct-20 35-AU-Request for Extension to Voluntary Suspension
8-Oct-20 33-au1-request-for-extension-to-voluntary-suspension
Being a company listed on the ASX, AU1 is subject to periodic and continuous disclosure
requirements and accordingly, further information concerning AU1 are contained in 1-Oct-20 32-au1-trading-halt
their ASX releases which may be accessed via the ASX website (www.asx.com.au) under 30-Sep-20 29-au1-appendix-4g
ASX Code “AU1” or AU1’s website (https://investors.theagency.com.au/ )
21-Sep-20 28-au1-proposed-issue-of-securities-au1
The table below summarises AU1’s ASX releases since 1 July 2020: 16-Sep-20 27-au1-change-in-substantial-holding
9-Sep-20 26-au1-strategic-partnership-as-part-of-west-coast-rent-roll-sale
Date of
AU1 ASX Announcement Title 31-Aug-20 25-au1-delivers-1st-full-year-ebitda-cashflow
Release
31-Dec-20 Suspension from Official Quotation 31-Jul-20 23-au1-appendix-4c-and-quarter-update
29-Dec-20 Postponement of AGM to 4 January 2021
29-Dec-20 Trading Halt If you would like to receive a copy of any of those releases (free of charge) during the
Offer Period, please contact Magnolia on the AU1 Offer Helpline on 1300 160 792 or by
29-Dec-20 Pause in Trading Halt
email to au1@magnoliacapital.com.au.
29-Dec-20 Takeovers Panel interim orders - Response by Nexia
24-Dec-20 AU1 ASX Announcement Nexia Response 1.1 Profile of AU1
22-Dec-20 48 Postponement of AGM
AU1 is a publicly listed company headquartered in Perth, Australia (ASX code: AU1) that
22-Dec-20 47 Media Release - Panel Makes Interim Orders
was registered with ASIC on 21 March 2006. Its primary business is to provide real
21-Dec-20 46 Expiry of Options estate and financial services including but not limited to the purchase and sale of
18-Dec-20 45 Notice of Change of Interests of Substantial Holder properties, the purchase and management of rent roll portfolios, property management
and mortgage and finance services. A detailed summary of AU1’s group is contained in
17-Dec-20 44 Media Release
1.4.
ADDENDUM TO NOTICE OF ANNUAL GENERAL MEETING AND SUPPLEMENTARY
11-Dec-20 INDEPENDENT EXPERT’S REPORT
9-Dec-20 43 Media Release
BIDDER’S STATEMENT | 10
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
1.2 Business Activities and Operations 1.3 AU1’s Directors
The AU1 Group has three main operating divisions: As at the date of this Bidder’s Statement, the Directors and Key Management Personnel
of AU1 are:
(a) property sales;
(b) property management; and Director / Key Management
Position
(c) ancillary services Personnel
Andrew Jensen Executive Chairman and Chief Operations Officer
1.2.1. Property Sales Paul Niardone Managing Director (appointed 19 December 2016)
Matthew Lahood Executive Director (appointed 17 January 2019)
This division is an agent recruitment model, conducting sales of residential properties
Adam Davey Non-executive Director (appointed 19 December 2016)
on behalf of property vendors. AU1 has reported that as at 6 November 2020 it had 281
real estate agents situated in 10 hubs across Australia, including Perth WA, Hawthorn Arjan van Ameyde Chief Financial Officer (appointed 1 February 2020)
VIC, Albert Park VIC, Wamberal NSW, Bondi Beach NSW, Neutral Bay NSW, Annandale Stuart Usher Company Secretary (appointed 28 December 2016)
NSW, Wollongong NSW, and Canberra ACT.
Source: AU1’s 30 June 2020 audited financial statements.
1.2.2. Property Management
This division manages residential and commercial properties on behalf of property
owners. As at September 2020, the Group reported having the following portfolio of
properties under management:
Properties Annual
Portfolio
Under Management Management Fees
New South Wales 3,457 $5,844,078
Victoria 100 $195,516
Queensland 26 $44,186
Total 3,583 $6,083,780
Source: Nexia Report (dated 23 November 2020)
1.2.3. Ancillary Services
This division’s ancillary services include mortgage broking, conveyancing and settlement
services. As at 31 March 2020, the Group reported having a mortgage loan book with
approximately 4,300 loans and $1.9 million in annualised trail income.
BIDDER’S STATEMENT | 11
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
1.4 AU1 Group Structure
Magnolia understands that AU1’s current group structure includes the following entities:
The Agency Group Australia Ltd
(ASX: AU1)
ACN: 118 913 232
100% 100% 80%
AUSNET Real Estate Services Pty Ltd Top Level Real Estate Pty Ltd Gazania Investments
ACN: 093 805 675 ABN: 79 615 413 879 Thirty Two Pty Ltd
Move Property Solutions Pty 100% 100% The Agency Sales NSW Pty Ltd 100% 100% Top Level Real Estate Holding Pty Ltd
Value Partner Program Pty Ltd
Ltd ABN: 59 616 016 365 ACN: 617 021 137
ACN: 131 327 654
ACN: 600 209 881
The Agency Project Sales NSW Pty Ltd 100% 100% The Agency Auctions QLD Pty Ltd
Vision Capital Management 100% 100% Ausnet Real Estate Network
Ltd t/a Sell Lease Property Pty Ltd ABN: 70 616 018 850 ACN: 616 016 310
ACN: 111 063 024 ACN: 131 327 654
The Agency Property Management 100% 100% The Agency Auctions VIC Pty Ltd
The Agency Property 100% 100% NSW Pty Ltd
Ausnet Asset Management Pty ACN: 616 016 445
Management WA Pty Ltd* ACN: 616 297 646
Ltd
ACN: 124 331 166
100% 100%
Westvalley Corporation Pty Courtesy Real Estate (NSW) Pty Ltd The Agency Marketing Pty Ltd
100% 100% Ausnet Property Investment ACN: 002 934 152 ACN: 616 015 877
Ltd t/a Mortgage Finance
Fund Pty Ltd
Solutions
ACN: 141 992 682
ACN: 101 816 586 100% 100%
S.J. Laing & Son Pty Ltd The Agency Project Sales VIC Pty Ltd
100% 55% ACN: 000 628 482 ACN: 616 015 671
AUSNET Financial Pty Ltd
Ausnet Opportunity Fund
ACN: 125 118 916
100% 100% The Agency Property Management
The Agency Sales QLD Pty Ltd
QLD Pty Ltd
Jelina Holdings Pty Ltd Empur Pty Ltd t/a Ausnet ABN: 12 616 018 163
100% 50% ACN: 616 298 161
t/ a Landmark Settlements Property Investment
Australia Strategies 100% 100% The Agency Property Management
ACN: 100 588 832 ACN: 123 678 384 The Agency Project Sales QLD Pty Ltd
VIC Pty Ltd
ABN: 61 616 015 500
ACN: 616 297 753
AUSNET Financial Planning 100% 100% Vicus Residential Pty Ltd
Services Pty Ltd 100%
ACN: 130 862 618 The Agency Sales VIC Pty Ltd 100%
ACN: 109 525 242 The Agency Marketing QLD Pty Ltd
ABN: 48 616 015 948
Group Structure Legend Top Level Real Estate Sales Pty Ltd 100% 100%
Property The Agency Marketing VIC Pty Ltd
Corporate or ACN: 616 860 210
Sales Entities Management
Payroll Entities
Entity
100% 100%
Dormant or Non-
The Agency Auctions NSW Pty Ltd
Mortgage Entities Settlement Entities ACN: 616 016 141
operating Entities
Source: Nexia Report (dated 23 November 2020)
BIDDER’S STATEMENT | 12
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
1.5 AU1’s Historical Statements of Financial Position Non-Current Liabilities
Trade and other payables - 35 -
AU1’s Consolidated Statement of Financial Position as at the end of the financial
Provisions 64 600 337
year on 30 June 2020 (audited) is:
Leases - - 3,895
FY 2018 FY 2019 FY 2020 Deferred tax liabilities 296 4,668 3,251
($’000)
Audited Audited Audited Total Non-Current Liabilities 360 5,304 7,483
Current Assets Net Non-Current Assets 5,217 37,735 30,019
Cash and cash equivalents 1,022 2,597 2,724
Total assets 9,787 50,130 46,977
Trade and other receivables 2,743 4,080 4,601
Less: Total liabilities -9,227 -41,099 -35,366
Financial assets - - 1,600
Net Assets 560 9,031 11,611
Current tax asset 191 - -
Equity
Other current assets 254 413 550
Issued capital 11,480 27,765 39,396
Total Current Assets 4,210 7,091 9,476
Reserves 566 583 929
Current Liabilities
Accumulated losses -11,487 -19,317 -28,713
Trade and other payables 7,379 13,556 9,773
Total Equity 560 9,031 11,611
Borrowings 1,100 21,127 13,843
Net cash and financial assets / (borrowings) 330 -17,387 -8,806
Provisions 388 1,113 2,287
Source: Nexia Report (dated 23 November 2020)
Leases - - 1,980
Total Current Liabilities 8,867 35,795 27,883 A complete version of the above financial statements are contained in AU1’s 2020
Annual Report (released on ASX on 30 September 2020).
Net Current Liabilities
-4,657 -28,704 -18,407
(Net Working Capital Deficit)
Non-Current Assets
Trade and other receivables - 283 270
Financial assets 408 1,142 170
Property, plant, and equipment 521 2,578 2,040
Right of use asset - - 4,645
Intangible assets 4,648 39,036 30,376
Total Non-Current Assets 5,577 43,039 37,502
BIDDER’S STATEMENT | 13
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
1.6 Financial Performance Net loss from ordinary activities before
-3,881 -9,255 -10,357
income tax expense
1.6.1. AU1’s Historical Statements of Profit or Loss Income tax benefit/(expense) 139 1,425 1,292
Net loss from ordinary activities -3,742 -7,831 -9,065
AU1’s Consolidated Statement of Profit or Loss and Other Comprehensive Income Source: Nexia Report (dated 23 November 2020)
for the financial year ended 30 June 2020 (audited) is:
A complete version of the above financial statements are contained in AU1’s 2020
FY 2018 FY 2019 FY 2020 Annual Report (released on ASX on 30 September 2020).
($’000)
Audited Audited Audited
Revenue 16,768 28,338 41,862 1.7 Magnolia’s concerns relating to AU1
Other income 46 165 994
1.7.1. Financial Performance Concerns
Total revenue and other income 16,814 28,503 42,856
Gain on acquisition 78 - - Magnolia, having reviewed the financial information available to it from ASX
Advertising and promotion expenses -479 -670 -1,242 lodgements has serious concerns for the managerial competence displayed by the
Computers and information technology Board to date. Of significance:
-432 -1,006 -1,330
expenses
Consultancy, legal and professional fees -2,406 -3,103 -2,917 (A) The Board has paid a significant proportion of capital raised in the last two
Occupancy costs -516 -2,178 -984 financial years to Key Management Personnel, related parties thereof or
directly to its directors. More specifically:
Salaries and employment costs -14,608 -24,024 -31,070
Share-based payments expense - -134 - (i) AU1 received cash injections by way of capital issues into the
Other expenses -1,422 -1,768 -2,649 business of $5,611,773 in FY20 and $8,650,000 in FY19;
EBITDA -2,971 -4,381 2,663 (ii) Of this $413,017 (FY20) and $613,160 (FY19) was paid either
directly to Key Management Personnel or related parties thereof
Depreciation and amortization -495 -2,267 -6,039
for services 1 provided; and
Impairment -200 -1,378 -5,230 (iii) A further $535,980 (FY20) and $484,000 (FY19) was paid to
EBIT -3,666 -8,026 -8,606 directors in directors fees.
These figures show that in FY20:
Interest income 9 13 18
Interest and finance costs -224 -1,243 -1,769 16.91% of the total capital raised by AU1 was spent on Key Management
Personnel or related parties.
1
Services include “professional services”, “licence fees”, “public relations”, “placement fees/transaction fees”, “advance
commissions/future fund”
BIDDER’S STATEMENT | 14
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(B) The Board has, to date, failed to satisfy its primary lender, Macquarie Bank (vi) However, on 11 May 2020, AU1 reported that it “has entered into
Limited (Macquarie), of its ability to meet its obligations under its loan and an agreement with its current funder Macquarie Bank Limited
security documents, most notably by allowing the Macquarie Facility to (“the Funder”) in relation to the repayment of its primary bank
expire. This has ultimately led to action by Macquarie, which suggests a lack debt on or before 30 September 2020” suggesting that the term of
of confidence by Macquarie in AU1. the Macquarie Facility had been extended rather than the
forbearance period, as was the actual case; and
In light of this, the Board has also seriously misrepresented to the market their
dealings with Macquarie, including: (vii) Again, on 30 September 2020, AU1 reported that the Macquarie
Facility was due to expire on 30 September 2020, “The facility
(i) On 31 March 2020, AU1 failed to repay its loan to Macquarie by expires on 30 September 2020, and as at the date of this report,
the termination date under the terms of the Macquarie Facility; 2 the Group is in the process of finalising an Amendment Deed to
revise the terms and extend the facility”, when in fact it was the
(ii) On 9 April 2020, Macquarie issued a letter of default to AU1; forbearance period that was due to expire on that date.
(iii) However, on 15 April 2020, AU1 reported that “its current primary (C) Macquarie’s position, according to the Board, has been one of support and
debt provider (“Debt Funder”), a tier one investment bank, has collaboration with AU1, when in fact, negotiations with Macquarie seem to
agreed to extend the term of the current facility by a further 10 have been turbulent, unsatisfactory and premised on Macquarie having a
days (to 24 April 2020). 3” This was despite Macquarie terminating presently enforceable right to enforce under the Macquarie Facility.
the Macquarie Facility and instead agreeing to forbear from
exercising its right to enforce for a further 10 days; This is further supported by the mischaracterisation of the BDO report and the
public announcements made in connection with same. In particular:
(iv) Again, on 27 April 2020, AU1 reported that “Its current funder, a
tier one Australian bank (“the Debt funder”), has remained (i) On 30 April 2020 and on 11 May 2020, AU1 reported that BDO was
supportive of the Company and has further extended the facility to appointed by AU1 to review the “financial model and advise on
1 May 2020 pending the formalisation of agreements to extend to operational improvements and corporate structure”. This was
the 30 September 2020...” 4 This announcement misled the market around the same time that forbearance terms were being
by failing to inform it that it was an extension of the forbearance negotiated with Macquarie;
period offered by Macquarie rather than an extension of the term
of the Macquarie Facility; Magnolia understands that in fact BDO was appointed at the
insistence of Macquarie for the purposes of providing an
(v) On 5 May 2020, AU1 entered into a deed of forbearance with independent review of the AU1 Group’s business operations and
Macquarie with a forbearance period end date of 30 September financial position and to provide a proposal for the repayment of
2020 5;
2
Fourth Amendment Deed 4
ASX Announcement dated 27 April 2020
3
ASX Announcement dated 15 April 2020 5
Forbearance Deed dated 5 May 2020
BIDDER’S STATEMENT | 15
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
all amounts owing by AU1 to Macquarie. If this is the case, the 1.7.2. Related Party Transaction Concerns
Board mischaracterised the true nature of BDO’s appointment;
A review of publicly available information reveals that Key Management Personnel and
(ii) The only conclusions announced to the public in respect of the their respective entities have failed to adequately keep shareholders updated in respect
BDO report was that announced on 29 October 2020, that “The of key associations, substantial holdings and interparty arrangements between those
positive findings of the recently completed BDO report, together parties. The result of these failings can have serious ramifications for voting, and for an
with an independent valuation of the company’s assets, assisted informed, competitive and efficient market for AU1 Shares. It suggests that AU1 is not
the board to determine the most optimal funding package to a widely held company but rather is closely held by the directors and their respective
fund its future growth.”; and entities who cooperate with each other and their respective entities in relation to the
conduct of AU1’s affairs.
(iii) Details surrounding the context in which the BDO report was
prepared have never been disclosed to the market or For ease of reference, the connection between the Key Management Personnel of AU1
shareholders, nor has any of the findings in that report. It also and their respective entities is summarised below:
appears that the BDO Report was not provided to Nexia.
Key
(D) The AU1 Board has failed to properly secure critical assets of the business Management Associated Entity Further comment about the associated entity
Personnel
which would otherwise be expected of a public company. Significantly:
Philip Re Regency Partners1 Regency Partners provided professional services
to AU1 and, Philip Rei was previously a director of
(i) the lease (AM826614E) in respect of the primary office premises, AU1.
located at L104B and L105B, 184 Campbell Parade, Bondi Beach, John Kolenda Daring Investments Pty Daring charges licence fees to AU1. It is presumed
is held in the name of lessee, and Key Management Personnel, Ltd (Daring)2 that these licence fees are in connection with the
domain name, however it is unclear what the legal
John Kolenda. It is for a term of 7 years, terminating on 30
Aura Group Holdings relationship between the entities is.
November 2023. 6 It is unclear from any title search of the Pte Ltd (Aura Group)2
premises, whether AU1 has any legal right to occupy this space Daring owns 24.3% of the shares issued in the
which could have very serious ramifications for any change to AU1 Aura Private Wealth Aura Group.
which Mr John Kolenda does not support; and Pty Ltd (Aura Private
Wealth)2 Aura Group is the 100% ultimate shareholder of
Aura Private Wealth.
(ii) The domain name “theagency.com.au” is currently registered to Aura Principal
Daring Investments Pty Ltd (an entity apparently controlled by Investments Pty Ltd The Aura Group owns 100% owned of Aura
John Kolenda), which has and continues to receive annual licence (Aura Principal Principal Investments.
fees, presumably in connection with the right to use the domain Investments)2 Aura Principal Investments is a shareholder of
AU1.
name. 7 Aura Capital Pty Ltd
(Aura Capital)2 Aura Capital is owed placement fees by AU1.
6
Lease Dealing AM826614E 7
Domain Name search 30/12/2020
BIDDER’S STATEMENT | 16
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
Paul Chapter One Advisers Mr Niardone is a director and beneficiary of AU1 a $750k loan secured by shares held by a
Niardone Pty Ltd (Chapter One)3 Chapter One. Chapter One receives fees for public director and substantial shareholder.
relations services it provides to AU1. It is not clear
Capulet Capital Limited whether this agreement nor the fees paid are 1. FY20 Annual Financial Statements and ASIC company Search
(Montagu)4 arm’s length dealings. These arrangements 2. ASIC Company searches and ASIC personal name extract
appear to date back to 2018. 8 3. FY20 Annual Financial Statements and ASIC company Search
4. ASIC Directors searches, AU1 Shareholder register dated 17 December 2020, ASIC
Mr Niardone is an ex-director and shareholder of Document Search and Australian Financial Review article dated 6 February 2009 titled
Montagu. Although this entity was acquired by “Brunei acquires a slice of Patersons”
Patersons in 2008, Montagu remains an active 5. ASIC Company searches and ASIC personal name extract
shareholder of AU1 and despite being recorded 6. ASIC Company searches and ASIC personal name extract
by ASIC as deregistered. 7. FY20 Annual Financial Statements, ASIC Company searches and ASIC personal name extract
Matthew Teldar Real Estate Pty Mr Lahood has personally received advance
Lahood Ltd (Teldar)5 commissions / future fund.
Ms Connie Lahood, Mr Lahood’s wife, is a director
and shareholder of Teldar, which owns shares in
AU1.
Adam Davey Canaccord Genuity Mr Davey is an ex-director and shareholder of
(Australia) Limited Montagu. Although this entity was acquired by
(Canaccord) 6 Patersons in 2008, Montagu remains an active
shareholder of AU1 and despite being
Patersons Securities deregistered with ASIC.
Limited (Patersons)
Patersons was mandated by AU1 to provide
Montagu Capital corporate services in respect for which it received
Limited (Montagu) fees from AU1.
Patersons was acquired by Canaccord in October
2019.
As advised in an ASX announcement dated 15
May 2020 “Peters Investments Pty Ltd was
introduced to AU1 by its recently appointed
mandated corporate advisor Canaccord Genuity
(Australia) Limited.”. Adam Davey is a Private
Clients & Institutional Director at Canaccord and
stands to benefit from the Peters transaction. 9
Tony Kalonda Pty Ltd Tony Leibowitz via Kalonda Pty Ltd as trustee for
Leibowitz7 (Kalonda) the Leibowitz Super Fund holds 2.13% of the
issued capital of AU1. Kalonda has also provided
8
AU1’s 30 June 2020 audited financial statements. 9
AU1’s 30 June 2020 audited financial statements.
BIDDER’S STATEMENT | 17
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
1.7.3. Links to Peters Investments
A review of publicly available information reveals that Key Management Personnel including but limited to their Related Entities have current and historical links to Peters and its related
parties. Magnolia does not suggest any wrongdoing by Peters and or Key Management Personnel. However, it is important to consider this background in assessing the Peters Proposal and
whether to support it or accept the Offer.
The Agency Group Australia NCML Holdings Limited18
Paincheck Limited Memphasys Ltd Ensurance Limited
Limited
(ASX:PCK) (ASX:MEM) (ASX:ENA)
(ASX:AU1)
Top 20 shareholder FY01 to
Robert Peters Largest shareholder1 Largest shareholder2 Top 20 shareholder3 Proposed largest shareholder4
FY045
Director: 10/04/2000 to
Non Executive Director 30/09/14 Director: 17/08/12 to Current3
Director 19/12/2016 to current 26/11/2003
Adam Davey to current Top 20 shareholder2 Chairman 13/05/15 to 29/09/17
Shareholder4 Top 20 Shareholder FY00 to
Shareholder1 Shareholder6
FY045
Director 10/04/2000 to
Director 12/11/14 to 30/09/16
Previous (FY19) top 20 Director 19/12/2016 to current 27/11/20029
Paul Niardone Chairman 2/09/16 to 30/09/168
shareholder7 Shareholder4 Top 20 Shareholder FY00 to
Shareholder
FY0417
Previous Director 22/03/2006 to
Top 20 Shareholder FY00 to
Michael Atkins Top 20 shareholder2 25/08/200710
FY0417
Shareholder11
Chief Financial Officer & Chief
Operating Officer 1/02/2018 to Chief Financial Officer
Arjan Van Ameyde
31/1/20203 1/02/20 to current4
Shareholder3
Director 04/07/2002 to
Director 27/09/2017 to current3 Top 20 shareholder4 01/12/20069
Antony Leibowitz
Largest shareholder $750k loan4 Top 20 shareholder FY03 to
FY0512
Patersons Securities
Joint Lead Manager13 Corporate Advisor14 Lead Manager15 Lead Manager16 Via Montagu Capital Ltd17
Limited/Canaccord Genuity
1. FY20 Annual Financial Statements for ASX:PCK 11. AU1 Shareholder register dated 17 December 2020
2. FY20 Annual Financial Statements for ASX:MEM 12. NCML Holdings Limited 2005 Annual Financial Statements
3. FY20 Annual Financial Statements for ASX:ENA 13. ASX:PCK ASX Announcement dated 11 August 2020
4. Nexia Report (dated 23 November 2020) 14. ASX:MEM Rights issue prospectus dated 01/03/2019
5. NCML Holdings Limited FY00 to FY04 Annual Financial Statements, ASIC Company searches and ASIC personal 15. Patersons Securities acted as lead manager for ASX:ENA $800k entitlement offer refer to ASX announcement dated 23
name extract April 2018.
6. FY18 Annual Financial Statements for ASX:ENA 16. ASX:AU1 ASX Announcement dated 11 May 2020
7. FY19 Annual Financial Statements for ASX:MEM via Assert Corporate & Investor Relations Pty Ltd 17. Via Montagu Capital Ltd 100% interest in Blackmort Nominees Pty Ltd which held shares directly. Montagu Capital Ltd was
8. EPAT Technologies Limited (Known ASX:PCK) FY17 Annual Report acquired by Patersons in 2008. Australian Financial Review article dated 6 February 2009 titled “Brunei acquires a slice of
9. ASIC Company searches and ASIC personal name extract Patersons”
10. ASIC Company searches and ASIC personal name extract 18. Historical & current names include, Chandler Macleod Ltd, MCML (Holdings) Ltd and Todehouse International Ltd
BIDDER’S STATEMENT | 18
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
1.7.4. Fit and Proper Personnel Concerns 6. ASIC company search
7. ABC article dated 3 October 2018 titled “Banking royal commission: Freedom Insurance shares
A review of publicly available information has revealed that Key Management Personnel plummet as it stops direct phone sales”
have been directors of failed companies. Under section 206F of the Corporations Act,
ASIC may disqualify a person from managing a corporation for up to five years provided 1.7.5. Highly Leveraged Shareholders Concerns
a person has been the director of two or more failed corporations within seven years
A review of publicly available information has revealed that Key Management Personnel
that have been wound up and their liquidator has lodged a report with ASIC regarding
the corporation’s inability to pay its debts. including their Related Entities have obtained financing via their shareholding entities
secured by their shares held in AU1. Whilst this is not a breach of the law or the Listing
Key Rules, it could have a material impact on the share price should the third-party lender
Company Appointed Resigned Comment
Person
take enforcement action. The enforcement could lead to the third party liquidating the
Freedom was involved in Royal
Commission into Misconduct in relevant AU1 Shares to recoup its funds.
the Banking, Superannuation and
% of Issued
Financial Services Industry4 Shareholder/Borrower Number of Shares Security Held by
Capital
Freedom Freedom’s shares were Macquarie Bank
Insurance Group suspended on 6 February 2019 as MCL 108 Pty Ltd
Andrew the company could not detail its Matthew Lahood 24,349,790 8.14% (Discharged 8 December
Ltd (In 18/10/16 29/4/19
Jensen financial position 5 2020)
Liquidation)1
(Freedom) ABC Credit SPV 2 Pty Ltd
Freedom was placed into Kalonda Pty Ltd
liquidation on 21 February 20206 John Kolenda 24,749,544 8.28%
Macquarie
Freedom was exposed in 2018 Paul Niardone 4,239,023 1.42% Kalonda Pty Ltd
selling life insurance by telesales
to a man with Down syndrome. Ben Collier 27,060,515 9.05% Macquarie
Paul Concannon Steven Chen 24,475,530 8.19% Macquarie
24/2/10 In Liquidation 5 March 2020
Niardone Capital Pty Ltd2
ACN 081 990 552 Shad Hassen 25,690,547 8.59% Macquarie
Proprietary Aura Principal
Limited (Formally Administrators appointed to Unknown Unknown Macquarie
Investments Pty Ltd
Stuart Known as Hire Proprietary 27 August 2012 Aura Private Wealth Westpac Banking
20/12/10 17/09/14 Unknown Unknown
Usher Access Receiver & Managers appointed Pty Ltd Corporation
Proprietary 04 October 2012 Goldfields Money
Limited)3 Limited
(Proprietary) Finsure Holdings Pty
2,175,000 0.73% One Managed
Note: Ltd
Investment Funds
1. ASIC Company search and ASIC document searches including historical ASIC Form 484s Limited
2. ASIC Company searches and ASIC personal name extract
Total 132,739,949 44.40%
3. ASIC Company search and ASIC document searches including historical documents lodged by
insolvency professionals Source: Nexia Report (dated 23 November 2020), PPSR searches, ASIC company searches and AU1
4. Royal Commission website www.royalcommission.gov.au shareholder listing
5. ASX:FIG announcement dated 6 February 2019
BIDDER’S STATEMENT | 19
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
1.7.6. Discrepancy in reporting suggests the sale of assets below market
value Cash & cash
HY EBITDA HY Revenue Cash Receipts
equivalents
30 December 2019
Despite having reported and acknowledged the market value of a key asset, the West Half Yearly Report $1.5m1 $25.6m1 $25.0m2 $3.7m2
Coast Rent Roll, the Board resolved to dispose of that asset at a value below the and Accounts
previously reported market value. 30 January 2020
in excess of
December Quarterly $25.2m4 $28.5m4 $5.15m4
A$0.54
4C report (Unaudited)
The AU1 Board entered into an agreement with Managex Funds Management Pty Ltd
Difference ~$1.0m $0.4m ($3.5m) ($1.45m)
for the sale of the West Coast Rent Roll. In the investor presentation dated 4 March
1. “In a significant milestone, the Group reported earnings before interest tax depreciation
2020, the West Coast Rent Roll asset had a reported value of $4.9M being $1.64M and amortisation (EBITDA) of $1.5 million, a significant turn-around.” Section 2.1 of the
higher than what the asset was actually sold for and reported in the ASX Announcement Directors’ Report
on 9 September 2020. The difference between the public statements in this regard is 2. Receipts from customers – Condensed consolidated statement of cash flows
summarised in the table below. It is unclear why such a significant reported valuation in 3. Cash and cash equivalents - Condensed consolidated statement of financial position
4. Under “Key Points” of the ASX Release dated 30 January 2020
respect of the West Coast Rent Roll existed but may be due to poor financial controls.
Further evidence of the continued mismanagement of the financial reporting, can be
WA PUM 31/12/19 9/9/20 Difference ascertained upon review of the 30 June 2020 Annual Report and Accounts compared
Number of properties # 1,122 1,173 +51 with the June quarterly 4C Report which are summarised below:
Value of Rent Roll $m 4.9 3.26* -1.64
*Final adjusted sale price Transaction costs
Transaction
Source: AU1 FY20 Financial Statements and ASX Announcement Dated 9 September 2020 Receipts Net Cash related to issues of
costs related
Notes: from from equity securities or
to loans and
Despite having 51 additional properties the rent roll was sold for $1.64m less than the amount Customers Operating convertible debt
borrowings
represented to investors in the investor presentation dated 4 March 2020. securities
30 June 2020
Annual Report and $42.5m $334k ($397k) -
1.7.7. Misrepresentation of financial information may be an indication of Account
poor financial controls 31 July 2020
June Quarterly 4C $56.2m ($307k) ($514k) ($243k)
Two separate ASX announcements, disclosing the Half Yearly Report and Account on 30 Report
December 2019 and the December Quarterly 4C report on 30 January 2020, being Difference ($13.7m) $641k $117k $243K
financial reports for the same period, demonstrate a significant disparity between that Source: AU1 FY20 Financial Statements, ASX Announcement Dated 9 September 2020 and
which auditors of AU1 have determined and that which the Board have reported only AU1 June Quarterly 4C lodged 31 July 2020
30 days later.
Review of these, again illustrate a significant discrepancy between the reported figures
for the same period, in a short time frame. It is unclear what the reason for these
differences could be.
BIDDER’S STATEMENT | 20
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
1.7.8. Misrepresentation of key assets may indicate poor financial business in excess of $10 million per annum. Total estimated market asset value
controls of rent roll and loan book is in excess of $27.0 million”;
- as contained in ASX Announcement dated 29 October 2020, AU1 stated that “A
AU1 has reported its ownership of its Rent Roll and Mortgage Book assets across WA, recent valuation conducted by leading experts in property management portfolio
NSW, Vic and Qld in numerous ASX announcements. This has included: valuations, Jemmeson Fisher, valued The Agency’s property management
portfolio at +$23 million alone;”; and
- as contained in an ASX announcement dated 15 February 2018, it was reported - as contained in an ASX release dated 6 November 2020 (containing a “ShareCafe
that the rent roll and mortgage book were valued at $24m and $4.0m respectively; Hidden Gems Webinar Investor Presentation” dated 6 November 2020), AU1
- as contained in an ASX announcement dated 19 September 2018, it was reported stated that the Group Total Assets were $27m. The $27m figure was referenced
that the rent roll and mortgage book were valued at $27.9m and $4.8m as follows “The Agency’s East Coast rent roll valued at in excess of $23 million.
respectfully; Combined with mortgage book brings The Agency’s total assets to in excess of $27
- as contained in an ASX announcement dated 30 August 2019, AU1 stated “In million.“
addition, the value of the key assets (mortgage book and rent roll) that sit off Significantly, though, these valuations have failed to account for the basis on which
balance sheet continues to rise and is in excess of $31 million.”; these valuations were ascertained.
- as contained in an ASX announcement lodged on 16 October 2019 and dated
Upon closer review of the relevant ASX announcements to date, it has become evident
September 2019, it was reported that the rent roll and mortgage book were
that the multiples used to calculate the value of the Rent Roll asset has differed
valued at $23.5m and $4.6m respectfully;
dramatically between states and across time periods thereby raising concern that the
- as contained in an ASX announcement dated 30 January 2020, AU1 stated that latest reported valuation of $23m as at 6 November 2020 is significantly overstated.
“The Company boasts significant assets, with a rent roll valued at ~ $23.5 million
and mortgage book valued at ~$4.6 million; This can be deduced from analysis of the valuation multiples used to value the Rent Roll
- as contained in an ASX announcement dated 4 March 2020, it was reported that asset in the September 18, September 19 and March 20 Investor Presentations when
the rent roll and mortgage book were valued at $24.24m and $4.8m respectfully; compared to the actual properties under management in the same periods. The figures
- as contained in an ASX announcement dated 30 March 2020, it was reported that reported in the respective presentations are summarised below”
the rent roll and mortgage book were valued at ~$23.50m and ~$5.2m
respectfully; Summary of Properties Under Management
- as contained in an ASX announcement dated 30 April 2020, AU1 stated that “The September 18 September 19 March 20
Nexia Report4
Investor Investor Investor
Agency continues to boast significant assets with a rent roll valued at ~ $23.5M
Presentation1 Presentation2 Presentation3
and mortgage book valued at ~$5.2M;
Number of Properties
- as contained in a ShareCafe “Hidden Gems” presentation dated 31 July 2020, Paul 940 1,122 0
Western Australia
Niardone advised that the rent roll and mortgage book were valued at ~$23m; New South Wales 3,355 3,437 3,457
- as contained in an ASX announcement dated 31 August 2020, AU1 stated “There 4,175
Victoria 70 89 100
remain significant intangible assets off the balance sheet, these include the rent Queensland 32 30 26
roll and the Mortgage Book. These assets contribute an annuity income to the Total 4,175 4,397 4,678 3,583
BIDDER’S STATEMENT | 21
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
Annualised 4. Nexia Report dated 23 November 2020. Figures are as at September 2020.
Management Fee
Western Australia 1.2 1.39 0 As can be seen in the above tables, the Board has used multiples that have changed
New South Wales 5.3 5.37 5.84 significantly (e.g. from 2.75 to 3.53 in respect of the West Coast Rent Roll and 5.00 to
Victoria 7.70 0.1 0.11 0.19 3.55 in respect of the Victorian Rent Roll) without any clear basis. It is Magnolia’s opinion
Queensland 0.04 0.05 0.04 that the West Coast Rent Roll discrepancy may be linked with the Managex sale at a
Total 7.70 6.64 6.92 6.08 multiple closer to 2.75. It can be deduced from this, that either, the West Coast Rent
Roll was sold at market value and the latest reported multiple used as at March 2020 is
Valuation incorrect or alternatively, the latest reported multiple is correct, but the sale to
Western Australia 3.3 4.9 Managex was at a value below market value.
New South Wales 19.6 18.8
27.90
Victoria 0.5 0.39 Not disclosed Importantly and in reliance on the above shown properties under management,
Queensland 0.1 0.18 Magnolia estimates the actual value of the Rent Roll Asset to be in the range of
Total 27.90 23.50 24.27 $21.28m (3.5x) to $22.49 (3.7x) based on the latest multiples used to value the East
Sources: Coast Rent Roll to date, rather than the last reported valuation of $23m in the Investor
1. ASX lodged Shareholder Presentation dated September 2018.
Webinar Presentation dated 6 November 2020.
2. ASX lodged Shareholder Presentation dated September 2019. Figures are as at 30
September 2019.
3. ASX lodged Shareholder Presentation dated 4 March 2020. Figures are as at 31 December 1.7.9. Incorrect disclosure of directors and substantial positions suggests
2019. poor internal controls:
4. Nexia Report dated 23 November 2020. Figures are as at September 2020.
Summary of Valuation Multiples A review of publicly available information and a review of the members register
September September 19 March 20 provided by AU1 has revealed that Key Management Personnel and a number of
Nexia shareholders have not accurately reported their substantial holdings.
18 Investor Investor Investor
Report4
Presentation1 Presentation2 Presentation3
Valuation Multiple Person Link to AU1 Description
Western Australia 2.75 3.53 Adam Davey, Michael Atkins and Paul Niardone were all
New South Wales 3.70 3.50 Not directors and shareholder of Capulet Capital Limited formally
3.62 disclosed known as Montagu Capital Limited (Name Changed
Victoria 5.00 3.55
2.50 3.60 Paul 06/02/2009). Magnolia understands that on or around
Queensland Director1
Niardone December 2008, Canaccord acquired the business of Montagu.
Overall Business
3.62 3.54 3.50 Montagu is currently shown as a shareholder of AU1 even
multiple
though ASIC records show this entity as currently deregistered.
Sources:
1. ASX lodged Shareholder Presentation dated September 2018.
The last substantial holder notice of 1/10/2019 of Teldar Real
2. ASX lodged Shareholder Presentation dated September 2019. Figures are as at 30 Estate Pty Ltd does not disclose that Mr Lahood’s wife is a
September 2019. Matthew
Director2 director and shareholder of the entity and so has a substantial
3. ASX lodged Shareholder Presentation dated 4 March 2020. Figures are as at 31 December Lahood
holding.
2019.
BIDDER’S STATEMENT | 22
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
Adam See Paul Niardone above 4. ASIC Directors searches, ASIC Document Search and ASIC personal name searches
Director3
Davey 5. ASIC Directors searches, ASIC Document Search and ASIC personal name searches
The substantial holder notice of 16/08/2019 given by Daring 6. ASIC Company searches
Investments Pty Ltd ATF Kolenda Family Trust and Daring 7. ASIC Directors searches, ASIC Document Search and ASIC personal name searches. AU1 FY20
Investments Pty Ltd does not disclose that Mr Kolenda’s wife is Financial Statements
a 50% shareholder and director of Daring Investments Pty Ltd
and so has a substantial holding. 1.7.10. Poor strategic management and related party advisors leading to
John Previous No substantial holder notice lodged with ASX shows the uncommercial debt facilities
Kolenda Director4 relevant interest that Daring Investments Pty Ltd has in the AU1
Shares held by Aura Principal Investments Pty Ltd and Aura On 11 May 2020 via an ASX announcement the Board announced “To assist in corporate
Private Wealth Pty Ltd. Those relevant interests arise because advisory, and to identify and evaluate available opportunities in relation to refinancing
those two shareholders are controlled by Aura Group Holdings
Pte Ltd, and Daring Investments Pty Limited holds 24.34% of
the current primary bank debt facilities, The Agency has mandated Canaccord Genuity
the shares in Aura Group Holdings Pte Ltd. (Australia) Limited. Canaccord Genuity is a global investment bank and one of Australia’s
premium financial services firms with over $15bn in funds under management.” On
Michael Atkins and Susan Atkins are equal shareholders of review of Canaccord’s website (https://www.psl.com.au/) it is unclear if the funds under
Windamurah Pty Ltd. Its directors are Michael Atkins, Susan
management as Canaccord directly or third party money that they manage on behalf of
Atkins, Matthew Atkins and Emily Salom (formally Emily
Atkins). Windamurah is a shareholder of AU1 clients. The website is also unclear on Canaccord's experience with fixed income
Advisor to transactions.
Michael the5
Emily Salom is currently a director of OMG Pty Ltd which is
Atkins company via
currently a shareholder of AU1. On 15 May 2020 via an ASX announcement the Board announced that it had secured a
Canaccord
$1m standby working capital facility from Peters Investments Pty Ltd. Peters was
Michael Atkins is also a previous director AU1 having been a
director from 22/03/2006 to 25/08/2007 introduced to AU1 by its recently appointed mandated corporate advisor Canaccord
Genuity (Australia) Limited. The key terms of the convertible note were:
Fan Cheung has not lodged an updated substantial shareholder
notice since 11/01/19. Fan Cheung is not the shareholder of
Fan Substantial Interest rate: 9%
Hanzheng KSW Pty. Ltd, Wai Ying Wong is. Wai Ying Wong is
Cheung Shareholder6 Security: Second security ranking behind Macquarie Bank
also a director of Hanzheng.
Free attaching Two (2) million Options exercisable at the lower of 4 cents and a 20%
Options: discount to 15 day volume-weighted average trading price of shares
Anthony Leibowitz via Kalonda Pty Ltd <Leibowitz Super Fund
A/C> is a 2.13% shareholder of AU1. Kalonda has also provided (“VWAP”) prior to the date of issue of the Options, on or before 2 years
Anthony from date of issue.
a $750k loan to AU1 and has security over Paul Niardone’s and
Leibowitz 7 Term of
John Kolenda’s shares in AU1. Unless converted to shares (as below) the Notes will be repaid in cash on
Converting the earlier of 31 December 2020 or when all amounts owing by the
Source: ASX Substantial shareholder notices as detailed in Section 2.2 below. Loan: Company to Macquarie Bank have been repaid (“Maturity Date”).
1. ASIC Directors searches, AU1 Shareholder register dated 17 December 2020, ASIC Document Conversion: At the Noteholders election the Notes can be converted into shares in The
Search and Australian Financial Review article dated 6 February 2009 titled “Brunei acquires
a slice of Patersons” Agency at the lower of $0.04 per share and a 20% discount to the 15 day
2. Company search of Teldar Real Estate Pty Ltd VWAP prior to the conversion date, up until the Maturity Date.
3. ASIC Directors searches and ASIC Document Search
BIDDER’S STATEMENT | 23
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
Other The Noteholder will have the first right of refusal to replace the Macquarie report again did not disclose any involvement from Canaccord therefore it is unclear if
Conditions: they will be receiving a fee for the further facility arranged from Peters Investment.
Bank loan on commercial terms and conditions to be reasonably agreed
between the Noteholder and The Agency.
Source: ASX announcement 15 May 2020 1.7.11. High salaries of Key Management Personnel and Directors despite
financial condition
The Board’s decision to provide Peters Investment with the first right of refusal to
replace the Macquarie Facility on an exclusive basis is undermined by the fact that based Despite the difficulties AU1 was facing in connection with existing loan obligations and
on publicly available materials it appears that Peters has provided a number of the negative cash flow it reported until 31 Dec 2019, the Board resolved to pay annual
convertible note facilities, but has not provided any fixed income transactions. It was compensation for to Directors/KMP as disclosed in its FY20 Financial Statements. The
unclear from the announcement if the further facility to be provide by Peters Estimated annual estimated compensation for FY21 is:
Investment was in the form of a convertible note or fixed income transaction.
Director / Key Salary Directors Superannu Additional Total
On 29 October 2020, via an ASX announcement (in italics set out below) the Board Management Fees ation Payments
advised shareholders that: Personnel
• Peters Investments had agreed to provide a further $5m convertible note to AU1 Andrew Jensen 319,635 60,000 36,065 415,700
increasing their position from $1m to $6m; Paul Niardone 390,000 37,050 427,050
Matthew Lahood 500,000 36,000 50,920 22,0001 608,920
• The Macquarie Facility was not being replaced by Peters, it was simply being
Adam Davey 48,000 4,560 52,560
reduced using a combination of capital from the sale of the West Coast Rent Roll
Total 1,209,635 144,000 128,595 22,000 1,504,230
and some of the funds from the Peters Investment notes; Source FY20 Financial Statements
• That Managex Funds Management Pty Ltd had secured a facility from Judo Bank Notes:
to acquire the WA rent roll. The announcement is unclear on why the Board did 1. Matthew Lahood also receives a car payment of $22,000 in addition to his salary
not approach Judo Bank to fund AU1. The announcement is also not clear if a
formal asset sale campaign was conducted to allow AU1 to achieve the highest 1.7.12. Potential Litigation Risk
possible price; and
• the terms of Peters Investment’s previous $1m convertible note facility had Magnolia is investigating a number of claims against AU1, its directors and agents. These
changed substantially including the reduction in the conversion price from $0.04 claims concern (non-exhaustively):
per share to $0.027 per share. This represents a discount of 48.1%.
(A) various representations which were made by AU1 and or its agents, and on
The 29 October 2020 announcement did not disclose any involvement from Canaccord which Magnolia relied, in acquiring shares in AU1 and which Magnolia
therefore it is unclear if they will be receiving a fee for the further facility arranged from considers were misleading and deceptive. These representations primarily
Peters Investment. concern the status of Macquarie Facility;
(B) AU1’s entry into various financing mandates at uncommercial rates, and in
On 23 November AU1 annexed an independent expert’s report from Nexia, which circumstances where more economic and viable alternatives existed;
included information relating to amendments to terms of the May 2020 Options. The
BIDDER’S STATEMENT | 24
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(C) entry by AU1 into the convertible notes agreement with Peters, in
circumstances where there were alternative, less dilutive, financing options
available to AU1; and
(D) the sale of the WA rent roll below the stated market value by the Company.
These claims are being actively investigated by Magnolia, but nevertheless Magnolia
expects that these claims could result in significant liabilities of AU1 (being several
million Australian dollars). Magnolia has not computed the quantum of these liabilities.
Magnolia further understands that one of its related entities has a claim against AU1 for
unpaid fees under a financing term sheet. This claim is likely result in liabilities to AU1
of around $354,471.99 (as at 25 Nov 2020) excluding interest and costs which continue
to accrue. This excludes any further fees payable under the mandate due to breach of
exclusivity.
BIDDER’S STATEMENT | 25
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
2 INFORMATION ON AU1 SECURITIES Incentive Performance Share Holder Holding
Adam Davey (current director) 1
2.1 Issued securities Paul Niardone (current director) 1
John Kolenda (previous director) 1
There are 298,954,431 AU1 Shares at the date of this Bidder’s Statement. The Australian Philip Re (previous director) 1
Stock Exchange ticker is AU1: Ross Cotton (previous director) 1
Total incentive performance shares 5
Range No. of holders Shares % Total
Source: AU1 FY20 Annual report
1 – 1,000 221 36,127 0.01%
1,001 – 5,000 124 347,216 0.12% AU1 has 0 listed options on issue at the date of this Bidder’s Statement.
5,001 – 10,000 107 790,246 0.26%
10,001 – 100,000 332 12,435,669 4.16%
100,001 and over 137 285,345,173 95.45%
Total 921 298,954,431 100.00%
Source: Nexia Report (dated 23 November 2020)
AU1 has 11,162,892 unlisted options on issue at the date of this Bidder’s Statement.
Optionholder Exercise Price Expiry Date Optionholding
Mr Adam Stuart Davey <Shenton Park
$0.30 11-Jan-22 333,333
Investment A/C>
Peters Investments Pty Ltd $0.03 25-May-22 2,000,000
Peters Investments Pty Ltd $0.03 31-Mar-23 8,829,559
Total unlisted options 11,162,892
Source: AU1 FY20 Annual report and recent ASX Announcements
AU1 has 5 incentive performance shareholders at the date of this Bidder’s Statement.
BIDDER’S STATEMENT | 26
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
AU1 Directors’ Relevant Interests and Voting Power in AU1 Securities Notes:
(A) Based on the substantial holder notices lodged by Mitchell Atkins dated 17 December 2020
Director / Key Ordinary Performance % of (updated to reflect current Relevant Interest and Voting Power).
Options
Management Personnel Shares Shares Company
(B) Based on the substantial holder notices lodged by Ben Collier dated 8 October 2019
Andrew Jensen 1,903,492 0.64%
(updated to reflect current Relevant Interest and Voting Power).
Paul Niardone 4,239,023 411,111 99,142 1.42%
(C) Based on the substantial holder notices lodged by Shad Hassen dated 4 October 2019
Matthew Lahood 24,804,398 9,622,044 8.30% (updated to reflect current Relevant Interest and Voting Power).
Adam Davey 1,064,307 266,667 388,095 0.36% (D) Based on the substantial holder notices lodged by Steven Adam Chen dated 4 October 2019
Total 32,011,220 677,778 10,109,281 10.71% (updated to reflect current Relevant Interest and Voting Power).
Source: AU1’s 30 June 2020 audited financial statements. (E) Based on the substantial holder notices lodged by Matt Lahood dated 8 October 2019
(updated to reflect current Relevant Interest and Voting Power).
2.2 Substantial shareholders of AU1 (F) Based on the substantial holder notices lodged by Fan Cheung dated 29 January 2019
(updated to reflect current Relevant Interest and Voting Power).
Based on material lodged with the ASX as at the date of this Bidder’s Statement
pursuant to section 671B of the Corporations Act and information otherwise known to (G) Based on the substantial holder notices lodged by John Kolenda dated 8 October 2019
(updated to reflect current Relevant Interest and Voting Power).
Magnolia, each of the following persons have a substantial shareholding in AU1 Shares:
(H) Based on the substantial holder notices lodged by Laurence Basell dated 9 August 2019
Shareholder Shareholding % Total (updated to reflect current Relevant Interest and Voting Power).
Magnolia Equities III Pty Ltd (A) 49,763,017 16.65% (I) Based on the Nexia Report dated 23 November 2020] (updated to reflect current Relevant
Ben Collier Investments Pty Ltd <Ben Collier Investments P/L> (B) 27,060,515 9.05% Interest and Voting Power).
MAK Property Group Pty Ltd <MAK A/C> I 25,690,547 8.59% Movements of less than 1% in Voting Power are not required to be disclosed to ASX via an updated
SEMC 2 Pty Limited <The Chen Asset A/C> (D) 24,475,530 8.19% substantial shareholding notice and accordingly, there may be variances between the Relevant
Interests and Voting Powers recorded in the table above and the most recent substantial
Teldar Real Estate Pty Ltd <MJ Lahood Family A/I(E) 24,349,790 8.14%
shareholding notices lodged on ASX. Current Relevant Interests and Voting Powers have been
Hanzheng KSW Pty Ltd <Hanzheng KSW Unit A/C> (F) 16,666,667 5.57% disclosed (where applicable).
Daring Investments Pty Ltd (G) 13,770,150 4.61%
Daring Investments Pty Ltd <Kolenda Family A/C> (G) 10,979,394 3.67% 2.3 Takeovers Panel Applications
Honan Insurance Group Pty Ltd (H) 7,692,308 2.57%
Nutsville Pty Ltd <Indust Electric Co S/F A/C> (I) 6,763,230 2.26%
There are two current Takeovers Panel proceedings concerning the affairs of AU1. These
are:
Top ten shareholders 207,211,148 69.30%
Other 91,743,283 30.70% • application from AU1 concerning Magnolia’s announcement of 4 December 2020
Total shares 298,954,431 100.00% and its financial capacity to carry out the Bid (Takeovers Panel Media Release of
Source: AU1’s share registry as of 5 November 2020. Nexia Report (dated 23 November 2020) 9 December 2020); and
• application from Magnolia concerning issues with the Nexia Report, and
BIDDER’S STATEMENT | 27
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
operation of the voting exclusions application to resolution 6 approving the 2.6 AU1 Share price history
Peters Proposal for the purposes of section 611 item 7 of the Corporations Act
2001 (Takeovers Panel Media Release of 17 December 2020). A summary table of rolling data on the trading volumes and values of AU1 Shares on
ASX (as of 31 December 2020) is as follows:
The Takeovers Panel made interim orders (Takeovers Panel Media Release of 22
December 2020) as a result of which Nexia responded to certain issues concerning the High Low
Nexia Report which were appended to the interim orders (AU1 ASX Announcement Periods (cents) (cents) Volume Value ($) Date High Date Low
dated 29 December 2020) (Nexia Response). Magnolia has reviewed the Nexia Week Rolling 5.10 5.10 3,200 $163 29-Dec-20 29-Dec-20
Response and does not consider that it sufficiently addresses the issues raised in the Month Rolling 5.40 4.90 1,248,503 $62,561 3-Dec-20 23-Dec-20
Annexure to the interim orders. Accordingly, it appears that these Panel proceedings
6 Month Rolling 5.80 2.80 8,670,103 $335,485 30-Nov-20 31-Aug-20
will continue after the date of this Bidder’s Statement and notwithstanding the outcome
of voting on the Peters Proposal at the AU1 AGM (currently scheduled to be held on 4 Year Rolling 6.10 2.80 14,096,733 $589,831 15-Jan-20 31-Aug-20
January 2021). Source: Refinitiv Eikon market data
As at the date of this Bidder’s Statement, the Takeovers Panel has not announced its A summary of the last sale price of AU1 Shares prior to the Announcement Date and the
decisions in respect of these applications. date of this Bidder’s Statement is as follows:
Magnolia will lodge a Supplementary Bidder’s Statement to provide an update on the Last sale price of AU1 Shares Date Closing Price (cents)
outcomes of these proceedings as announced by the Takeovers Panel (if necessary).
Prior to Announcement Date 3 December 2020 5.00
2.4 Relevant interest in AU1 securities and voting power Prior to date of Bidder’s Statement 31 December 2020 5.10
Source: Refinitiv Eikon market data
As at the date of this Bidder’s Statement:
A summary of the highest and lowest price of AU1 Shares during the 4 months prior to
● Magnolia has a Relevant Interest in AU1 Shares and Voting Power in AU1 as
the Announcement Date and the date of this Bidder’s Statement is as follows:
detailed in Section 5.3.
● None of the Directors or Officers of Magnolia have a Relevant Interest in AU1
Shares or AU1 Rights, except as detailed in Section 5.4.
2.5 Consideration provided for AU1 securities during the previous four months
Neither Magnolia (nor any of its associates) has acquired AU1 Shares during four months
ending on the day immediately before the date of this Bidder’s Statement.
BIDDER’S STATEMENT | 28
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
Shareholding Position (AU1 Shares in millions)
Highest and lowest closing Lowest Price Highest Price
31-Aug-20
AU1 Share prices
24-Dec-20 30-Nov-20 31-Oct-20 30-Sep-20 31-Jul-20 30-Jun-20 31-May-20 30-Apr-20 31-Mar-20 29-Feb-20 31-Jan-20 31-Dec-19
# Investor Name
during the 4 months: Date Cents Date Cents
Prior to Announcement Date 31-Aug-20 2.80 01-Dec-20 5.60 1 Magnolia Equities III Pty. Ltd. 49.76 49.76 49.76 49.76 10.70 10.70 10.70 10.70 10.70 10.70 10.70 10.70 10.70
2 Ben Collier Investment Pty. Ltd. 27.06 27.06 27.06 27.06 27.06 27.06 27.06 27.06 27.06 27.06 27.06 27.06 27.06
Prior to date of Bidder’s 3 Mak Property Group Pty. Ltd. 25.69 25.69 25.69 25.69 25.69 25.69 25.69 25.69 25.69 25.69 25.69 25.69 25.69
Statement 31-Aug-20 2.80 01-Dec-20 5.60 4 Semc2 Pty. Ltd. 25.60 25.60 25.60 25.60 25.60 25.60 25.60 25.60 25.60 25.60 25.60 25.60 25.60
5 Daring Investments Pty. Ltd. 24.75 24.75 24.75 24.75 24.75 24.75 24.75 24.75 24.75 24.75 24.75 24.75 24.75
Source: Refinitiv Eikon market data 6 Teldar Real Estate Pty. Ltd. 24.68 24.68 24.68 24.68 24.35 24.35 24.35 24.35 24.35 24.35 24.35 24.35 24.35
7 Hanzheng Ksw Pty. Ltd. 16.67 16.67 16.67 16.67 16.67 16.67 16.67 16.67 16.67 16.67 16.67 16.67 16.67
8 Honan Insurance Group Pty. Ltd. 7.69 7.69 7.69 7.69 7.69 7.69 7.69 7.69 7.69 7.69 7.69 7.69 7.69
A summary of various periods’ VWAP of AU1 Shares is as follows: 9 Nutsville Pty. Ltd. 6.76 6.76 6.76 6.76
10 Kalonda Pty. Ltd. 6.36 6.36 6.36 6.36 7.69 7.69 7.69 7.69 7.69 7.69 7.69 7.69 7.69
11 Niardone (Paul) 4.24 4.24 4.24 4.24 4.24 4.24 4.24 4.24 4.24 4.24 4.24 4.24 4.24
12 Crossbay Pty. Ltd. 4.22 4.22 4.22 4.22
Period ending Lowest Highest 13 On Time Taxis Pty. Ltd. 4.00 4.00 4.00 4.00
31 December Price Price VWAP No. of 14 Trindis Pty. Ltd. 3.19 3.19 3.19 3.19 1.39 1.39 1.39 1.39 1.39 1.39 1.39 1.39 1.39
15 Goodall (Andrew Ernest) 3.00 3.00 3.00 3.00
2020 (cents) (cents) Volume Value ($) (cents) Trades
16 Big Leap Super Pty. Ltd. 2.83 2.83 2.83 2.83
1 month 4.90 5.10 1,248,503 $62,561 5.02 43 17 Kode (Subodh Raja) 2.21 2.21 2.21 2.21
2 months 3.50 5.60 2,916,040 $141,590 4.78 116 18 Finsure Holdings Pty. Ltd. 2.18 2.18 2.18 2.18 2.28 2.28 2.28 2.28 2.28 2.28 2.28 2.28 2.28
19 Appwam Pty. Ltd. 2.00 2.00 2.00 2.00
3 months 3.50 5.60 3,136,040 $150,519 4.72 123 20 Furore Pty. Ltd. 1.96 1.96 1.96 1.96
4 months 3.30 5.60 4,397,524 $194,773 4.49 146 21 Jensen (Andrew Paul) 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90
6 months 2.80 5.60 8,670,103 $335,485 4.10 246 22 Davey (Adam) 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06
23 Lahood (Matthew) 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.36 0.36 0.36 0.36
9 months 2.80 5.60 10,917,809 $426,021 4.08 341 Source: Refinitiv Eikon market data
12 months 2.80 6.10 14,096,733 $589,831 4.33 446
Source: Refinitiv Eikon market data Notes
Kalonda Pty Ltd and Finsure Holdings Pty Ltd, the long standing major shareholders of AU1 partly
A monthly shareholding summary of top 23 shareholders is as follows: exited their holdings in between August 2020 and September 2020, which had an impact on
overall shareholder sentiments
The sale of shares by key shareholders and funders of AU1 is a sign that they may have lost
confidence in AU1 and its management
BIDDER’S STATEMENT | 29
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
2.7 AU1 share price performance since October 4, 2019 2.8 AU1 share price performance since reverse listing on December 28, 2019
AU1 Share Price Performance Since Oct 4, 2019 AU1 share price performance since reverse listing on Dec 28
8.00 2,000,000
80.00 2016 2,000,000
7.00 1,800,000
70.00 1,800,000
1,600,000
Traded Share Volume
Share Price (Cents)
6.00 1,600,000
1,400,000 60.00
1,400,000
Share Price (cents) Traded Share Volume
5.00 1,200,000 50.00 1,200,000
4.00 1,000,000
40.00 1,000,000
3.00 800,000 800,000
30.00
600,000 600,000
2.00 20.00
400,000 400,000
1.00 200,000 10.00 200,000
0.00 - 0.00 -
Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Dec-16 Nov-17 Oct-18 Sep-19 Aug-20
Volume Share Price Volume Share Price
Source: Refinitiv Eikon; market data as of 24 December 2020 Source: Refinitiv Eikon; market data as of 24 December 2020
Notes: Notes:
• For the period between 4 October 2019 to 30 September 2020 (the period analysed by Nexia, • Since reverse listing of AU1 on 28 Dec 2016, the share price has continued to decline
see section 5.8 of the Reports), Magnolia traded 4,743,855 AU1 shares, which represents circa
29% of all AU1 trades during that period As permitted by ASIC Corporations (Consents to Statements) Instrument 2016/72, ASX
securities trading price and volume data within this Bidder’s Statement has been
• Magnolia traded over 1.59% of AU1’s issued capital (298,954,431 shares) which shows that sourced from Refinitiv Eikon without its consent.
AU1 shares were illiquid during the 12-month period ending on 30 September 2020.
• Additionally, the largest single volume day was 31 July 2020, wherein 1,751,749 AU1 shares
were traded and Magnolia’s traded volume (1,397,618) was 79.8% on this day
BIDDER’S STATEMENT | 30
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
3 MAGNOLIA’S INTENTIONS (c) refinancing the Macquarie Bank Facility on terms no less favourable to AU1.
Please refer to Sections 4.3 and 4.5 – the funds for which commitments have
been received by Magnolia referred to in those sections will be available for this
3.1 Overview purpose.
This section sets out Magnolia’s intentions, on the basis of the facts and information Magnolia notes that any AU1 Directors nominated by Magnolia will act at all times in
concerning AU1 known to Magnolia as at the date of this Bidder’s Statement, in relation accordance with their statutory and fiduciary duties and in the interests of AU1 and its
to the following: Shareholders as a whole.
● the continuation of the business of AU1;
3.2 Intentions upon acquiring 90% or more of the AU1 Shares
● any major changes to the business of AU1 and any redeployment of the fixed
assets of AU1; and Magnolia’s intentions if at the end of the Offer Magnolia has a Relevant Interest in more
than 90% of AU1’s Shares and is entitled to proceed to compulsory acquisition of the
● the future employment of the present employees of AU1.
outstanding AU1 Shares are set out below.
These intentions have been formed by the Sole Director of Magnolia. Magnolia and its
Compulsory acquisition
advisers have reviewed information concerning AU1 and its businesses and assets that
is publicly available. Despite repeated requests to AU1 for access to allow this, Magnolia
If it becomes entitled to do so under the Corporations Act, Magnolia intends to exercise
has not undertaken any formal due diligence in relation to AU1’s business in connection
its rights to proceed to compulsory acquisition of AU1 Shares in accordance with Section
with the Offer.
661A of the Corporations Act.
In light of the above information limitations, Magnolia is not aware of all material
If it is required to do so under Sections 662A and 663A of the Corporations Act, Magnolia
information, facts and circumstances that may be necessary to enable it to form
will give notice to AU1 Shareholders and holders of AU1 Rights offering to acquire their
complete or definitive intentions or to assess all of the operational, commercial,
AU1 Shares and AU1 Rights in accordance with Sections 662B and 663B of the
taxation and financial implications of its current intentions. Consequently, the
Corporations Act, respectively.
statements set out in this section are statements of Magnolia’s current intention only,
which may change as new information becomes available or circumstances change,
ASX Listing
including from the information provided by AU1 in its Target’s Statement. The
statements in this section should be read in this context.
At the conclusion of the compulsory acquisition process, Magnolia intends to arrange
for AU1 to be removed from the official list of ASX.
Magnolia’s intentions generally are to privatise AU1 to preserve its value and to allow
for it to continue to operate into the future. It intends to achieve this by:
Directors
(a) Immediately engaging a suitable accounting/advisory firm (e.g. BDO, Deloitte,
McGrathNicol etc) to conduct an independent review of the business and its Magnolia intends to deal with Key Management Personnel as follows:
operations (discussed further in Section 3.2). Magnolia has had preliminary
discussions with the parties;
(b) taking steps to remove AU1 from the official list of the ASX; and
BIDDER’S STATEMENT | 31
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
Director / Key Management Personnel Position a. consideration of existing advisory mandates including but not limited
to Canaccord and Aura Capital;
Andrew Jensen Terminate
Paul Niardone Terminate b. advising on steps to privatise the business and operations;
Matthew Lahood Continue employment c. advising on dealing with all outstanding taxation and employee
Adam Davey Terminate liabilities;
Arjan van Ameyde Continue employment d. reviewing all existing material agreements;
Stuart Usher Terminate 7. identifying any other strategic and operational matters that may enhance
commercial returns including the possibility of disposing of the AU1 business;
The replacement directors would include Mr Atkins (details of which are set out in 8. reviewing the performance and roles of all AU1 employees; and
Section 5). If accepted, Matthew Lahood and Arjan van Ameyde (together, Key Persons)
will continue in their current role. 9. identifying other investment opportunities (including the acquisition of
additional property management portfolios) which may provide commercial
AU1’s businesses, assets and employees returns and profitability from the assets of AU1 including its cash reserves.
Once the condition has been met, Magnolia will immediately engage an Magnolia anticipates that final decisions will only be reached by the AU1 Board after
accounting/advisory firm to conduct an independent expert report on the business that formal review and in light of all material facts and circumstances. Following this,
operations of AU1. The accounting/advisory firm will review several aspects of AU1 and Magnolia will encourage the AU1 Board to adopt a plan to implement, as quickly as
its operations, assets, liabilities and employees, with a view to determining the extent possible, the steps which the review indicates should be taken to achieve the intentions
to which and how Magnolia’s general intentions set out in Section 3.1 might be set out in Section 3.2.
achieved. This review will include:
While Magnolia does not currently have any specific intentions in relation to this review
1. review of the historical affairs of AU1; or its outcomes, its current expectation is that the review will focus on identifying the
2. the conducting of an independent valuation of the assets of AU1 including but most effective means of enhancing the value of AU1’s assets and utilising AU1’s assets
not limited to the property management portfolio and mortgage book; to maximise the returns to AU1 Shareholders. As a consequence, the strategic direction
of AU1 may remain or may shift away from the sector in which it currently operates,
3. review of all related party transactions and agreements and advise on which of and may involve capital returns, dividends or buy-backs to return a portion of the cash
these should be terminated; reserves to AU1 Shareholders.
4. consideration of ways that corporate and administration expenses of AU1 might
be reduced; For the avoidance of doubt, the business will continue as a going concern while the
above is being undertaken.
5. review of the contents of the BDO Report;
6. developing ways to reduce the other expenses, and increase the revenue, of the
AU1 business to seek to achieve improved performance as soon as possible and
profitability within a reasonable period – this will encompass a review of the
following matters and the underlying strategy and objectives related thereto:
BIDDER’S STATEMENT | 32
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
3.3 Intentions upon acquiring less than 90% of the AU1 Shares
Magnolia’s specific intentions if at the end of the Offer AU1 is a controlled entity of
Magnolia but AU1 is not a wholly owned subsidiary of Magnolia (which will only occur
where Magnolia has acquired a Relevant Interest in more than 90% of AU1’s Shares and
has completed the compulsory acquisition process to gain an interest in 100% of AU1
Shares) are set out below.
Directors
Magnolia will make the changes in the same way as is described in Section 3.2.
AU1’s businesses, assets and employees
Magnolia will make the changes in the same way as is described in Section 3.2, bearing
in mind the interests of other shareholders and the constraints and requirements of
directors’ duties, the Corporations Act and the Listing Rules.
ASX Listing
Magnolia will maintain the current listing of AU1 on the ASX until a delisting is approved
by the ASX and shareholders (if required by ASX).
3.4 Limitations on intentions
Magnolia will comply with all requirements of law, including the AU1 Constitution, the
Corporations Act and the Listing Rules in pursuing the intentions referred to above. As
a result of these requirements the approval of AU1 Shareholders as well as approvals
from regulators or third parties may be required for the implementation of some or all
of these intentions.
BIDDER’S STATEMENT | 33
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
4 CONSIDERATION AND FUNDING o net assets (including the repayment to it by the Magnolia Group of
liabilities owed by the Magnolia Group to them but excluding the
value of their equity investments in the Magnolia Group) of no less
4.1 Consideration payable than A$20 million.
Its Investors:
The issued capital of AU1 consists of 298,954,431 fully paid ordinary shares of which • Magnolia has also obtained not less than $18 million in commitments from
Magnolia holds 49,763,017 (representing 16.65% of the AU1 Shares). Magnolia is various wholesale investors known to Magnolia. One of the commitments, is
accordingly offering to acquire the remaining 249,191,414 AU1 Shares. subject to final board approval (ASX listed company), will be triggered in the
event that the Offer is accepted and becomes unconditional.
The total amount of the Consideration which Magnolia will be required to provide if all
the Offers are accepted is $9,967,656.56. Magnolia Group:
Having regard to the matters set out in this section, Magnolia is of the opinion that it The Magnolia Group has undertaken to make available to Magnolia by way of an
has a reasonable basis for forming, and it holds, the view that it will be able to pay the interest-free loan or capital subscription to meet Magnolia’s obligations under the Bid.
maximum Consideration payable under the Offer. The Magnolia Group:
• has $5 million standing to the credit of a bank account with a major Australian
4.2 Form of Consideration payable ADI;
• has gross assets of approximately $373 million as at 31 December 2020
The Consideration will be paid in cash. The amount payable to each Accepting AU1
comprising cash, listed and unlisted investments, investments in managed
Shareholder will be rounded to the nearest cent.
funds and loan receivable assets;
• net assets as at 31 December 2020 are $40 million, which has been verified by
4.3 Funding of Cash Consideration
a qualified accountant;
Magnolia has access to $10,000,000 in cash to pay the Consideration from the following • has investments in listed securities (excluding AU1 Shares), managed funds,
sources: and loan receivables that are due to be repaid in the next two months – these
are liquid assets that are realisable into cash to supplement existing cash
Its Controllers: reserves; and
• Mr Atkins has $7.5 million standing to the credit of a bank account with a • has undrawn facilities with major Australian ADIs (including a $5m debt facility
major Australian ADI which he has undertaken to make available to Magnolia with BT Financial) and investors which are available to it on demand and for
by way of interest-free loan or capital subscription to meet Magnolia’s which there are no unsatisfied conditions precedent to drawdown.
obligations under the Bid;
• Mr Atkins has $3.5m in liquid listed equities (excluding AU1 Shares) which can If the Offer in unconditional, Magnolia and its Controllers have agreed immediately to
be readily sold to fund the Bid in the event that it is required; and deposit any required funding into a bank account in the name of the Bidder.
• The Controllers have agreed with Magnolia to support it to perform its
obligations under the Bid. Their net asset position (which has been verified by
a qualified accountant) includes:
BIDDER’S STATEMENT | 34
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
4.4 AU1’s Existing Debt Funders
Magnolia has spoken with a number of senior funders that have existing agreements in
place with AU1, as outlined below:
4.5 Funding of Macquarie Facility Replacement
Funder Status
Macquarie In AU1’s ASX announcement dated 29 October 2020 and the Nexia Despite repeated requests to AU1 for access to allow Magnolia and its funders to
Report dated 23 November 2020, AU1 advised that Macquarie is undertake formal due diligence in relation to AU1’s business in connection with the
willing to extend the Macquarie Facility for a further 24 months if the Offer, the access needed for such due diligence has not been provided. Accordingly,
debt under that facility is reduced to $5m. alternative funding options for the Macquarie Facility have been limited. Once this
access has been provided, Magnolia considers that additional funders will respond
Magnolia’s lawyers have written to the lawyers for Macquarie to positively to proposals to refinance the Macquarie Facility. Despite this, Magnolia has
discuss Macquarie’s interest in continuing to be a funder of AU1 after spoken with a number of alternative senior funders as outlined below:
the Bid. Macquarie’s lawyers who have requested consent from the
AU1 Board to discuss future funding negotiations with Magnolia. As Funder Funder Description Status
at the date of the Offer, the AU1 Board has not consented. Samuel Terry Asset STAM manages the Samuel Conditionally approved awaiting
Management (STAM) Terry Absolute Return Fund, payment of the commitment
Kalonda Pty Ltd On 30 December 2020, Magnolia’s legal advisors wrote to Kalonda which invests in a portfolio of fee.
requesting clarification on its position and if it would be interested equity and debt securities in
in assigning the debt or would be interested in continuing its funding. Australia and internationally. Its
On 31 December 2020, Kolenda responded asking that Magnolia objective is to generate double-
contacts it directly. As at the date of this Offer, Magnolia and digit annual returns for our
Kolenda have not agreed terms or a position. clients, while trying to minimise
the risk of permanent loss of
their capital.
SME Cash (Funded by On 15 December 2020, the CEO of this entity advised Magnolia that
Nomura) it had offered a debt facility to AU1 and continued to have great faith
Magnolia was introduced to
in the ability of their facility to assist AU1 to exit its existing and STAM by one of the directors of
proposed debt arrangement. The CEO of this entity has indicated to AU1.
Magnolia that it would continue negotiations in this respect once the SME Cash (Funded by Has at least A$100 million of Has provided a commitment to
Bid goes unconditional or should AU1 provide its consent. As at the Nomura Holdings) assets under management and Magnolia to fund no less than $8
date of the Offer, AU1 has not provided its consent. is supported by Nomura. million. Mr Atkins has had
conversations with this Funder’s
Magnolia discussed the SME Cash offer with an AU1 director in CEO in this regard, including
October this year. most recently on 9 December
Peters Investments Pty Magnolia has written to Peters asking if it would assign the rights 2020. Following this
Ltd under its existing facility with AU1 to Magnolia and if Peters would conversation, Mr Atkins has
consent to the Bid should the Peters Proposal be approved at the been in daily communication
with the account manager
AGM. Peters is not prepared to consent to assigning its rights under
under the CEO’s supervision to
its existing facility nor would it consent to the Magnolia Proposal.
negotiate terms. Subject to the
BIDDER’S STATEMENT | 35
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
termination of any existing advanced in two tranches. The offered facility was for a term of 2 years subject to annual
mandates (to the extent these review and standard conditions to be expected of a such a facility. AU1 as borrower and
exist), Magnolia proposes to its 28 subsidiaries as corporate guarantors (Obligors), executed the Letter of Offer.
continue with negotiations with
this funder who has already
expressed interest in the unique
Under the Letter of Offer the Obligors provided information undertakings to assist the
funding opportunity. lender in completing its due diligence process. The Obligors failed to comply with this
Macquarie See Section 4.4 above undertaking despite numerous requests for information. Magnolia has been in
Large asset manager One of the world’s largest asset The funder was introduced to a communication with AU1’s solicitors in relation to this offer.
managers director of AU1 in July 2020 to
finalise discussions. The Funder Should the above debt facilities not be made available to Magnolia and given AU1’s low
is open to reengaging in net debt position of $3.9m (as advised in the Nexia Report), Magnolia clearly has the
discussions once a data room ability to repay the Macquarie Facility in cash.
can be provided by AU1.
Institutional Asset Is an institutional asset manager Magnolia has been in
Manager that provides creative solutions discussions with the funder
for those seeking capital in regarding a convertible bond
special situations. The firm financing facility.
employs 50+ people globally,
where the investment
leadership team has an average
of 20+ years of experience. Since
inception in 2015, the funder
has deployed over $2 billion into
investments that typically range
from $5 to$50 million.
Funder backed by Working capital financier that in Magnolia has had historical
Softbank 2019, extended $143bn of discussions with the funder and
financing to 10m-plus their credit committee has
customers and suppliers in reviewed the transaction that
more than 175 countries. indicated that a facility can be
made available subject to a
review of the property
management agreements. This
was conveyed to the AU1 Board
and its legal advisors earlier this
year.
4.6 Magnolia Facility
By Letter of Offer dated 30 January 2020, Magnolia Private Capital Pty Ltd (a related
entity of Magnolia) made available to AU1, a facility of up to $15,000,000 to be
BIDDER’S STATEMENT | 36
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
5 PROFILE OF MAGNOLIA Magnolia is the entity in the Magnolia Group that holds the Magnolia Group’s equity
interest in AU1.
5.1 Overview of Magnolia 5.2 Ownership of Magnolia
Founded in 2015, the Magnolia Group provides a premium range of fixed income, Magnolia is 100% owned by the Controllers through a family trust.
equities and advisory products and services to High Net Worth and Family Office
Wholesale Clients. It does so as a result of its extensive referral network, access to a 5.3 Magnolia’s Relevant Interest and Voting Power in AU1
strong deal flow and the industry experience of its staff. The Magnolia Group is an Asia-
Pacific focussed financial services business, operating primarily through its 5 offices As at the date of this Bidder’s Statement, Magnolia has a Relevant Interest in AU1 Shares
located in Sydney, Central Coast (NSW), Melbourne, Hong Kong and Singapore. and Voting Power in AU1, as follows:
Division Description
Holder of AU1 Shares Magnolia Relevant Magnolia Voting
Fixed Income • Launched in 2015 Interests Power
• Over A$1.5 billion invested
• 300+ transactions Magnolia Equities III Pty Ltd 49,763,017 16.65%
• 11%+ returns generated
Total 49,763,017 16.65%
• Always lender on record
Source: Nexia Report (dated 23 November 2020)
Listed Equities • ~$43 million turnover
• 149%1 growth in Consolidated Equities NAV since inception 5.4 Magnolia’s Officers and their interests in AU1
o 161%+ in large-cap equities
o 79%+ in small-cap equities As at the date of this Bidder’s Statement, the Sole Director and Sole Secretary of
• ~$5 million invested by MC (including profit reinvestment)
Magnolia is Mr Atkins. His qualifications and experience can be summarised as follows:
Advisory • Over 200 clients serviced
• Services include
Mitchell Atkins has over 10 years financial services experience both in Australia and
• Business advisory internationally. He has worked with some of the world's largest professional services
• Business compliance and taxation firms including Big-4 accounting firms and private equity firms. His financial services and
• Self-managed super funds product expertise covers debt, equity, mergers and acquisitions and corporate
• Valuations, mergers & acquisitions workouts. Mitchell has managed investments in, and acted as an independent director
of, ASX listed and non-listed companies and provided transaction advice to a broad
Real Estate • Over $550m invested range of Australian SMEs. Mitchell holds a Bachelor of Business majoring in Accounting
• $1b+ advised and Finance.
• 60+ active properties
Mr Atkins has the same relevant interest in AU1 shares as Magnolia because he
1. Listed Equities returns are the consolidated pre-tax returns (before any fees) of parties related to
exercises control over Magnolia. He has no relevant interest in any other AU1 shares.
the Magnolia Capital since inception on 31 March 2020 and as of 30 November 2020.
BIDDER’S STATEMENT | 37
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
6 TAXATION IMPLICATIONS The Australian taxation summary that follows is based on the law, and interpretation
thereof, in force as at the date of the Bidder’s Statement.
6.1 No tax advice given Australian-resident AU1 Shareholders
Acceptance of the Offer may have taxation implications. You should seek professional AU1 Shares held on revenue account
advice regarding the taxation implications of accepting the Offer.
For AU1 Shareholders who are tax resident in Australia, any gain or loss from the
Magnolia and its advisors do not accept any liability or responsibility for any taxation disposal of their AU1 Shares will be assessed as ordinary income or may be claimed as
implications arising from the acceptance of the Offer by Australian resident and non- a revenue deduction where the shares are held on revenue account. For example shares
resident AU1 Shareholders or for the summary below. in AU1 that were acquired as part of entering into a profit making transaction or were
acquired for the purposes of resale at a profit probably will be treated as being on
This summary is of a general nature and is not intended to address the circumstances revenue account. The CGT discount is not available to reduce that gain.
of any particular individual or entity.
AU1 Shares held on capital account
The summary is not exhaustive of all possible Australian income tax considerations that
could apply and, in particular, does not address the tax considerations applicable to AU1 Shareholders may realise a capital gain or capital loss in respect of the disposal of
investors that may be subject to special tax rules. Nor does it address the various their AU1 Shares where the AU1 Shares are held on capital account. The acceptance of
exemptions and specific rules that might apply to non-resident pension plans and this Offer would constitute the disposal of AU1 Shares by the AU1 Shareholder, which
sovereign funds. in turn would constitute a CGT event for Australian taxation purposes. CGT roll-over
relief will not be available to the AU1 Shareholders.
This summary is based upon the legislation and established interpretation of legislation
as at the date of this Bidder’s Statement but is not intended to be an authoritative or For AU1 Shareholders who are tax resident in Australia, a capital gain should arise on
complete statement of the law as relevant to the circumstances of each AU 1 disposal of their AU1 Shares to the extent that the capital proceeds from the disposal
Shareholder. (being the cash consideration received under the Offer) exceed the cost base of their
AU1 Shares. The cost base of the AU1 Shares is broadly the amount paid to acquire the
AU1 Shareholders should obtain independent Australian (and, if relevant, foreign) shares plus certain non-deductible incidental costs such as brokerage fees.
advice on the taxation consequences of the Offer before accepting. Shareholders not
resident in Australia for tax purposes should also seek advice from their taxation adviser The taxation treatment of the gain will depend on the date of acquisition of the AU1
as to the taxation implications of accepting the Offer in their country of residence. Shares, the AU1 Shareholder’s cost base and the nature and tax attributes of the AU1
Shareholder.
6.2 Australian taxation issues for Accepting AU1 Shareholders
For AU1 Shares disposed of within 12 months of acquisition, the full amount of the
It is not possible to cover all AU1 Shareholder situations in the Australian taxation capital gain realised would be assessable. If a AU1 Shareholder (being an individual,
summary that follows (which, except where otherwise expressly stated, applies only to trust or superannuation fund) has held their AU1 Shares for at least 12 months, the AU1
Australian tax-resident taxpayers) and the taxation implications of the decision by a AU1 Shareholder may apply the CGT discount. The CGT discount is used to reduce the
Shareholder whether or not to accept the Offer will depend on the particular assessable capital gain by one half (i.e. 50%) for individuals and trusts, and by one third
circumstances of each AU1 Shareholder.
BIDDER’S STATEMENT | 38
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(i.e. 33 1/3%) for superannuation funds. Companies are not entitled to the CGT of AU1’s assets are attributable to Australian real property (which the Bidder
discount. understands is not the case).
A capital gain from a disposal of AU1 Shares, is aggregated with other capital gains made If a capital gain were made, the CGT discount is not available for non-residents.
by the Shareholder in the same income year. Any available capital losses of the
Shareholder from the same or previous income years may then be offset against the 6.3 Foreign taxation issues for Accepting AU1 Shareholders
capital gains (subject to satisfaction of loss recoupment tests). If there is a capital gain
remaining after application of available capital losses, the Shareholder may be entitled The foreign taxation implications of non-resident AU1 Shareholders disposing of AU1
to apply a discount (as above). Shares will be a function of the taxation laws (foreign and Australian) as they apply to
those AU1 Shareholders. It is not possible to address these situations as they will be
AU1 Shareholders who are tax resident in Australia may realise a capital loss on specifically dependent on the taxation laws of the applicable jurisdictions, any relevant
disposal of their AU1 Shares to the extent the amount of the capital proceeds received double-tax agreements and the particular circumstances of the AU1 Shareholder.
is less than the cost base of the AU1 Shares. The AU1 Shareholder may utilise the
capital loss against any available capital gains of the current year in working out their 6.4 Stamp duty
net capital gains for the income year for inclusion in their assessable income. Any
excess capital loss may be carried forward to be offset against any capital gains made Stamp duty is not payable on the transfer of the Shares to the Bidder
by the AU1 Shareholder in a future year.
6.5 GST
If for any reason the conditions of the Offer are not satisfied or waived, no disposal
Dealings in securities are not subject to GST. Shareholders will not, therefore, be liable
will occur, and no CGT implications should arise.
for GST.
Non-resident AU1 Shareholders
AU1 Shares held on revenue account
If an AU1 Shareholder who is not resident in Australia enters into a profit-making
transaction in Australia with respect to their AU1 Shares, the profit on disposal of the
AU1 Shares may be included in its assessable income as ordinary income. However the
Australian taxation implications will depend on the source of the gain and whether
there is a double-tax agreement between the non-resident AU1 Shareholder’s country
of residence and Australia.
AU1 Shares held on capital account
AU1 Shareholders who are not resident in Australia will generally not be subject to
Australian CGT on acceptance of the Offer unless they, together with their Associates,
directly own at least 10% or more of the AU1 Shares and more than 50% of the value
BIDDER’S STATEMENT | 39
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
7 ADDITIONAL INFORMATION Magnolia will give a notice of the status of the Conditions in accordance with the
Corporations Act on [Status] 2021 (subject to extension if the Offer Period is extended).
7.1 Date for determining identity of AU1 Shareholders 7.6 Consents to be named
For the purposes of item 6 of section 633(1) of the Corporations Act, this Bidder’s The Bidder’s Statement includes statements which are made in, or based on statements
Statement will be sent to persons who held AU1 Shares at the Register Date. made in, documents lodged with ASIC or given to ASX. Under the terms of ASIC
Corporations (Consents to Statements) Instrument 2016/72, the parties making those
7.2 ASIC modifications statements are not required to consent to, and have not consented to, inclusion of
those statements in this Bidder’s Statement. If you would like to receive a copy of any
Magnolia has not obtained from ASIC any modifications of or exemptions from the of those documents (free of charge) during the Offer Period, please contact Magnolia
Corporations Act in relation to the Offer. Magnolia has relied on class order relief on the AU1 Offer Helpline on 1300 160 792 or by email to au1@magnoliacapital.com.au.
granted by ASIC which applies generally to all persons, including Magnolia.
As permitted by ASIC Corporations (Consents to Statements) Instrument 2016/72, this
7.3 No benefits during previous four months Bidder’s Statement contains ASX securities trading price and volume data sourced from
IRESS Limited without its consent.
Neither Magnolia nor any of its Associates has, during the period of four months ending
on the day immediately before the date of the Bidder’s Statement, given, or offered or 7.7 No other material information
agreed to give, a benefit to another person, which benefit was likely to induce the other
person, or an Associate, to accept an offer or dispose of AU1 Shares and which benefit There is no information that:
was not offered to all holders of AU1 Shares.
(a) is material to the making of the decision by a holder of AU1 Shares whether or
not to accept the Offer; and
7.4 No escalation agreements
(b) which is known to Magnolia,
Neither Magnolia nor any Associate of Magnolia has entered into any escalation
other than:
agreement in respect of AU1 Shares that is prohibited by section 622 of the
Corporations Act. (i) as set out or incorporated in this Bidder’s Statement; or
(ii) information which it would be unreasonable to require Magnolia to disclose
7.5 Status of Conditions
because the information has previously been disclosed to holders of AU1
Shares.
The Conditions of the Offer are set out in Section 8.7.
As at the date of this Bidder's Statement, Magnolia is not aware of any events that would
result in a breach of or inability to satisfy the Conditions, except that it is concerned that
some of the ASX filings of Magnolia may be inaccurate, as discussed elsewhere in this
Bidder’s Statement.
BIDDER’S STATEMENT | 40
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
8 TERMS OF OFFER (d) An Offer in this form is being made to each AU1 Shareholder registered in the
Register on the Register Date. The Offer also extends to any AU1 Shares held by
any person other than Magnolia, who becomes registered as a holder of your
This section contains the terms of the Offer. If you accept the Offer, a binding contract AU1 Shares during the Offer Period (provided you have not already accepted
arises between you and Magnolia for you to sell to Magnolia and for Magnolia to the Offer in respect of those AU1 Shares), and is also made to all persons holding
purchase the AU1 Shares to which your acceptance relates (Acceptance Shares) on the such AU1 Shares during the Offer Period.
terms of this section.
(e) If at any time during the Offer Period, another person becomes registered as the
The terms of the Offer in this section prevail, to the extent of any inconsistency, over holder of some or all of your AU1 Shares to which the Offer relates:
any descriptions in any other part of this Bidders’ Statement of any matter that is
included in this section. (i) a corresponding offer on the same terms and conditions as the Offer will
be taken to have been made to that other person in respect of those
Descriptions in any other part of this Bidders’ Statement of any matter that is included AU1 Shares;
in this section do not add to the terms of the Offer as set out in this section. (ii) a corresponding offer on the same terms and conditions as the Offer will
be taken to have been made to you in respect of any remaining AU1
8.1 Identity of Company making Offer Shares you hold to which the Offer relates; and
Magnolia is making the Offer. (iii) the Offer to you will be deemed to have been withdrawn immediately
at that time in relation to any AU1 Shares that you have ceased to hold.
8.2 Date of the Offer
8.4 Consideration
The Offer is dated [OPEN] 2021.
The Consideration Magnolia offers you, as a AU1 Shareholder, is payment of the Offer
8.3 Offer Price for each of your Acceptance Shares.
(a) Magnolia offers to acquire all of your AU1 Shares from you on the terms of the 8.5 Benefit of improved Consideration
Offer.
If Magnolia increases the Offer Price, the Corporations Act requires it to ensure that any
(b) You may accept the Offer in respect of some or all of your AU1 Shares. AU1 Shareholder who has already accepted the Offer receives the benefit of the
increase.
(c) It is a term of the Offer that:
8.6 Offer Period
(i) Magnolia will be entitled to, and you agree to transfer to Magnolia, all
Rights attaching to or arising from your Acceptance Shares acquired by The Offer will, unless withdrawn, remain open for acceptance during the period
Magnolia pursuant to the Offer; and commencing on the date of the Offer, being [Open] 2021, and ending at 5:00pm (Sydney
(ii) the Offer will not vary as a result of the declaration, payment or time) on the later of:
existence or accrual of any Rights. (a) [Close] 2021; or
BIDDER’S STATEMENT | 41
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(b) any date to which the period of the Offer is extended in accordance with the 2. whether any of the Listed Documents discloses that any condition other
Corporations Act. than this condition would be triggered by material contained in in the
Listed Documents (or any of them) or by performance of any or all of
Magnolia reserves the right, exercisable in its sole discretion, to extend the Offer Period them.
in accordance with the Corporations Act.
(d) No Prescribed Occurrences between Announcement Date and the end of the
If Magnolia varies the Offer by increasing the Offer Price within the last 7 days of the Offer Period
Offer Period or Magnolia’s Voting Power in AU1 increases to more than 50% within the
last seven days of the Offer Period, the Offer Period will automatically be extended to During the period starting on the Announcement Date and ending at the end of
end 14 days after the day on which the Offer was varied by increasing the Consideration the Offer Period, no Prescribed Occurrence occurs.
or the date Magnolia’s Voting Power in AU1 increased to more than 50%.
(e) No material transactions
8.7 Conditions of the Offer
Except for any proposed transaction reasonably full details of which are publicly
The Offer and any contract arising from acceptance of the Offer is subject to fulfilment announced by AU1 before the Announcement Date, none of the following
or waiver by Magnolia (which in relation to each condition may be in whole or in part) events occurs during the period starting on the Announcement Date and ending
of each of the following Conditions: at the end of the Offer Period without the written consent of Magnolia:
(a) 90% minimum acceptance (a) AU1, or any subsidiary of AU1, acquires, offers to acquire or agrees to
acquire one or more companies or assets (or an interest in one or more
During or at the end of the Bid’s bid period, Magnolia and its Associates have companies or assets) for an amount in any single transaction of more
Relevant Interests in 90% (by number) of the AU1 Shares subject to the Bid. than A$1 million or an amount in aggregate in any series of transactions
of more than A$0.5 million, or makes an announcement about such an
(b) No approval of the Peters Proposal acquisition or acquisitions;
During the period starting on the Announcement Date and ending at the end of (b) AU1, or any subsidiary of AU1, enters into, offers to enter into or
the Offer Period, none of the proposed resolutions numbered 3-7 in the AGM announces that it proposes to enter into any joint venture, partnership
Materials (i.e. Agenda items 4 – 8) is moved and passed by the AU1 shareholders or dual listed company structure involving a commitment of greater
in general meeting. than A$0.5 million in any single transaction or an amount in aggregate
in any series of transactions of more than A$0.25 million, or makes an
(c) Provision of material information announcement about such a commitment; or
In its Target’s Statement AU1 specifically addresses: (c) AU1, or any subsidiary of AU1, incurs or commits to, or grants to another
person a right the exercise of which would involve AU1 or any subsidiary
1. the Listed Documents (including whether there are any documents in of AU1 incurring or committing to any capital expenditure or liability for
each category of the Listed Documents); and one or more related items of greater than A$0.5 million, or makes an
announcement about such a commitment.
BIDDER’S STATEMENT | 42
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(f) No material adverse change 2. any such agreement or other such instrument being terminated or
modified or any action being taken or arising thereunder;
During the period starting on the Announcement Date and ending at the end of
the Offer Period, no change occurs, is discovered (including where Magnolia 3. the interest of AU1 in any firm, joint venture, trust corporation or other
becomes aware that information publicly filed is, or is likely to be, incomplete, entity (or any arrangements relating to such interest) being terminated
incorrect or untrue or misleading) or becomes public which has or could or modified; or
reasonably be expected to have a material adverse effect on the assets,
liabilities, financial position, performance, profitability or prospects of AU1 4. the business of AU1 with any other person being adversely affected.
including no material adverse change to the value of the AU1’s group total
assets (Rent Roll and Mortgage Book) (Assets). For the avoidance of doubt, the (i) Conduct of AU1’s business
Assets are valued at no less than $27million as described in the ASX
Announcement made by AU1 on 29 October 2020. During the period starting on the Announcement Date and ending at the end
of the Offer Period, none of AU1 nor any body corporate which is or becomes
a subsidiary of AU1, without the written consent of Magnolia:
(g) No material failings in filings
1. declares, or distributes any dividend, bonus or other share of its profits
Magnolia does not become aware, during the period starting on the or assets except for a dividend by a wholly-owned subsidiary of AU1;
Announcement Date and ending at the end of the Offer Period, that:
2. alters the rights attached to any of its shares or other securities or
1. any document (including the AGM Documents) filed by or on behalf of
proposes to do so;
AU1 with ASX, ASIC or any other regulator or given to AU1 shareholders
contains a statement which is incorrect or misleading in any material
3. makes any change to its constitution or passes any special resolution or
particular or from which there is a material omission; or proposes to do so;
2. there has been an omission by AU1 to give any material information to
4. gives or agrees to give any encumbrance (including a security interest or
ASX, ASIC or any other regulator or AU1 shareholders required by the mortgage) over any of its assets otherwise than in the ordinary course
ASX Listing Rules, the Corporations Act or any other applicable law.
of business;
(h) No persons exercising rights under certain agreements or instruments 5. increases the aggregate limit of AU1 and its subsidiaries’ bank facility
limit, or draws down on that facility or otherwise borrows other than in
Before the end of the Offer Period, there is no person exercising or purporting the ordinary course of the business of AU1 and its subsidiaries taken as
to exercise or stating an intention to exercise any rights under any provision of a whole;
any agreement or other instrument to which AU1 is a party or by or to which
AU1 or any of its assets may be bound or be subject, which results, or could 6. releases, discharges or modifies any substantial obligation to it of any
result, to an extent to which is material in the context of AU1 taken as a whole, person, firm or corporation or agrees to do so;
in:
1. any money borrowed by AU1 being or becoming repayable or being 7. appoints any additional director to its board of directors whether to fill
capable of being declared repayable immediately or earlier than the a casual vacancy or otherwise;
repayment date stated in such agreement or other instrument;
BIDDER’S STATEMENT | 43
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
subsidiary of AU1, pays or provides or agrees (whether conditionally or
8. enters or agrees to enter into any contract of service or varies or agrees contingently) to pay or provide any benefit to any person, or foregoes or
to vary any existing contract of service with any director or manager, otherwise reduces any payment or benefit or agrees to forgo or reduce any
enters or agrees to enter into any contract for service or varies or agrees payment or benefit to which it would otherwise be entitled, in connection with
to vary any existing contract for service with any consultant or any person making or agreeing to participate in, or enter into negotiations
contractor or other person for the provision of the services of a director concerning:
or manager or the provision of services the same as or substantially
similar to those provided (or that otherwise would be provided) by a 1. a takeover bid for AU1 or any body corporate which is or becomes a
director or manager, or pays or agrees to pay any retirement benefit or subsidiary of AU1; or
allowance to any director, manager or other employee or consultant or
contractor, or makes or agrees to make any substantial change in the 2. any other proposal to acquire any interest (whether equitable, legal,
basis or amount of remuneration of any director, manager or other beneficial or economic) in shares in, or assets of, AU1 or any body
employee or consultant or contractor (except as required by law or corporate which is or becomes a subsidiary of AU1, or to operate AU1
provided under any superannuation, provident or retirement scheme as as a single economic entity with another body corporate;
in effect on the Announcement Date);
except for a payment, benefit or agreement:
9. conducts its business otherwise than in the ordinary course; or
3. for providing professional advisory services to AU1;
10. executes a deed of company arrangement or passes any resolution for
liquidation, or has appointed or becomes susceptible to the 4. which is approved in writing by Magnolia;
appointment of an administrator, a receiver, a receiver and manager or
a liquidator, or becomes subject to an investigation under the Australian 5. which is approved by a resolution passed at a general meeting of AU1;
Securities and Investments Commission Act 2001 (Cth) or any or
corresponding legislation involving a contravention of the Corporations
Act by AU1 or a subsidiary of AU1. 6. which is made to, provided to, owed by or made with Magnolia.
(j) Conduct of AU1 Key Persons (l) No force majeure event
During the period starting on the Announcement Date and ending on the expiry During the period starting on the Announcement Date and ending at the end
of the Offer Period, either of the Key Persons who are currently employed by of the Offer Period, no act of war (whether declared or not) or terrorism,
AU1 fail to enter into an agreement to remain employed by AU1 for a period of mobilisation of armed forces, civil commotion or labour disturbance, fire or
12 months from the completion of the takeover on terms no less favourable natural disaster, infectious disease or other event beyond the control of AU1
than their current terms of employment. or the relevant subsidiary occurs which has an adverse effect or is likely to
have an adverse effect on the assets, liabilities, financial position,
(k) No break/inducement fees performance, profitability or prospects of the AU1 Group taken as a whole.
During the period starting on the Announcement Date and ending at the end of
the Offer Period, none of AU1 and any body corporate which is or becomes a
BIDDER’S STATEMENT | 44
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(m) Non-existence of certain rights (p) No material litigation
During the period starting on the Announcement Date and ending at the end During the period starting on the Announcement Date and ending at the end of
of the Offer Period, no person has any right (whether subject to conditions or the Offer Period:
not) as a result of Magnolia acquiring AU1 Shares:
1. none of AU1 and any body corporate which is or becomes a subsidiary
1. to acquire, or require AU1 or a subsidiary of AU1 to dispose of, or offer of AU1 has threatened or commenced against it any material claims or
to dispose of, any material asset of AU1 or a subsidiary of AU1; or proceedings in any court or tribunal (and a claim or proceeding is taken
to be material if it may reasonably result in a judgment of A$100,000 or
2. to terminate or vary any material agreement with AU1 or a subsidiary more), other than that which has been fully and fairly publicly disclosed
of AU1. to ASX prior to the Announcement Date;
(n) No superior alternative proposal 2. the consideration under the Bid is required to be increased or Magnolia
or an associate of Magnolia is required or reasonably likely to be
No alternative proposal to Magnolia’s takeover bid is announced during the required to pay any amount to any one or more AU1 shareholders in
Offer Period that: connection with the Bid as a result of:
1. is recommended by any AU1 Director; or (A) any litigation that is commenced, is threatened to be
commenced, announced or is made known to AU1 (whether or
2. offers consideration that is equal or higher than the consideration not becoming public); or
offered under the Offer valued, as far as practicable, in accordance with
the principles applying under section 621(3) of the Corporations Act and (B) any preliminary or final decision or order of any regulator or
ASIC Regulatory Guide 9: Takeover bids. other government agency, other than as a result of Magnolia
publicly undertaking to increase the consideration under the Bid
(o) Market movement (10% fall) or Magnolia lodging a notice of variation under section 650D of
the Corporations Act relating to an increase of the consideration
During the period starting on the Announcement Date and ending at the end of under the Bid; or
the Offer Period:
3. the aggregate liability of AU1 and any body corporate which is a
1. the All Ordinaries Index is 10% or more below its level as at the close of subsidiary of AU1 under or in connection with any existing claim or
trading immediately preceding the Announcement Date; or proceeding in any court or tribunal is or is likely to be materially more
than the provision made for the claim or proceeding in AU1’s last
2. The S&P/ASX 200 Index is 10% or more below its level as at the close of audited annual financial statements or, if no provision has been made,
trading immediately preceding the Announcement Date, for a duration is or likely to be more than $100,000.
of longer than 3 consecutive ASX trading days.
BIDDER’S STATEMENT | 45
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
8.8 The nature and benefit of the Conditions If at the end of the Offer Period (or in the case of the Condition described in Section
8.7(d), 3 Business Days after the end of the Offer Period) the Conditions in Section 8.7
Each of the Conditions described in Sections 8.7 is a condition subsequent. The non- have not been fulfilled and Magnolia has not declared the Offer free from the Conditions
fulfilment of any Condition does not, until the end of the Offer Period, or, in the case of that have not been fulfilled, all contracts resulting from the acceptance of the Offer will
the Condition described in Section 8.7(d), until the third Business Day after the Offer be automatically void.
Period, prevent a contract to sell your Acceptance Shares resulting from your
acceptance of the Offer. 8.10 Notice on the status of the Conditions
Subject to the Corporations Act, Magnolia alone is entitled to the benefit of the The date for giving the notice on the status of the Conditions required by Section 630(3)
Conditions in Section 8.7, or to rely on any non-fulfilment of any of them. of the Corporations Act is [Status] 2021, subject to variation in accordance with Section
630(2) of the Corporations Act if the Offer Period is extended.
Each Condition in Section 8.7 is a separate, several and distinct condition. No Condition
will be taken to limit the meaning or effect of any other Condition. 8.11 Variation of the Offer
If something happens that means that a Condition to which this Offer (or the contract Magnolia may at any time vary the Offer in accordance with the Corporations Act.
resulting from your acceptance of this Offer) is subject, at the time that thing happens,
would not be fulfilled, each Condition set out in Section 8.7 affected by that thing 8.12 Withdrawal of the Offer
becomes two separate Conditions on identical terms except that one relates solely to
that thing and the other specifically excludes that thing. Magnolia may declare the Offer Magnolia may withdraw the Offer at any time with the written consent of ASIC and
free one of those Condition under Section 8.9 without declaring it free from the other subject to the conditions (if any) specified in such consent. Notice of withdrawal of the
and may subsequently declare the Offer free of the latter Condition. Offer must be given by Magnolia to ASX.
8.9 Freeing the Offer from the Conditions 8.13 Payment of Consideration
Subject to Section 650F of the Corporations Act, Magnolia may, at any time and at its (a) (Time of payment of Consideration) Subject to this Section 8.13 and the
sole discretion, declare that the Offer is to be freed from any or all of the Conditions. Corporations Act, if you accept the Offer, and the Conditions of the Offer and of
the contract resulting from acceptance of the Offer are satisfied or waived,
Magnolia may declare the Offer free from any or all of the Conditions either generally Magnolia will pay the Consideration for your Acceptance Shares on or before
or by reference to a specific fact, matter, event, omission, occurrence or circumstance the earlier of:
(or class thereof), by giving notice in writing to AU1. This notice must be given:
(i) one (1) month after the date the Offer is validly accepted by you, or if
(a) in the case of the Condition described in Section 8.7(d), no later than 3 Business the Offer is subject to a defeating Condition when accepted, within one
Days after the end of the Offer Period; and month after the contract resulting from your acceptance of the Offer
becomes unconditional; and
(b) in the case of all other Conditions, not less than 7 days before the end of the
Offer Period. (ii) 21 days after the end of the Offer Period.
BIDDER’S STATEMENT | 46
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(b) (Where additional documents are required) Where the Acceptance Form (d) (Method of paying) Payment of the Cash Component will be by cheque in
requires additional documents to be given to Magnolia with your acceptance of Australian currency. The cheque will be sent by prepaid ordinary mail at your
the Offer to enable Magnolia to become the holder of your Acceptance Shares: risk to you at your address shown in the copy of the register of AU1 Shareholders
that Magnolia last received from AU1 or, in the case of addresses outside
(i) if the documents are given with your acceptance, Magnolia will pay the Australia, by prepaid airmail.
Consideration in accordance with paragraph (a) above;
(e) (Rights) Where Magnolia becomes entitled to any Rights on acceptance of the
(ii) if the documents are given after acceptance and before the end of the Offer, you must give Magnolia all documents that Magnolia needs to give
Offer Period and the Offer is subject to a defeating Condition at the time Magnolia title to those Rights, except where Magnolia has waived its
that Magnolia is given the documents, Magnolia will provide the entitlement to a Right. If you do not give those documents to Magnolia, or if you
Consideration by the end of whichever period ends earlier: have received the benefit of those Rights before Magnolia provides the
Consideration to you, Magnolia will deduct from the Consideration otherwise
A. within one month after the contract resulting from your due to you under the Offer the amount (or value, as reasonably assessed by
acceptance of the Offer becomes unconditional; or Magnolia) of those Rights. If Magnolia does not, or cannot, make such a
deduction, you must pay that amount to Magnolia.
B. 21 days after the end of the Offer Period;
8.14 Who may accept
(iii) if the documents are given after acceptance and before the end of the
Offer Period and the Offer is unconditional at the time that Magnolia is (a) (During the Offer Period) Any person who is able to give good title to a parcel
given the documents, Magnolia will provide the Consideration by the of your AU1 Shares may accept (if they or any other person have not already
end of whichever period ends earlier: accepted an Offer in the form of the Offer) as if an offer on the terms of the
Offer had been made to them.
A. one month after Magnolia is given the documents; and
(b) (Registered holders) A person is taken to hold AU1 Shares if the person is
B. 21 days after the end of the Offer Period; or registered as the holder of those AU1 Shares. If a person is registered as the
holder of AU1 Shares and they hold them on trust or as nominee or custodian
(iv) if the documents are given after the end of the Offer Period, and the for another person (Beneficial Owner), and the Beneficial Owner wishes the
Offer is unconditional at that time, Magnolia will provide the Offer in respect of those Shares to be accepted, the Beneficial Owner must
Consideration within 21 days after the documents are given. (subject to the terms of any trust, nominee or custody deed, agreement or
arrangement with the registered holder) have the registered holder accept the
If you do not provide Magnolia with the required additional documents within Offer.
one month after the end of the Offer Period, Magnolia may, in its sole discretion,
rescind the contract resulting from your acceptance of the Offer. (c) (Holders of two or more parcels) A person may accept the Offer under this
Section 8.14 separately for each of two or more parcels of AU1 Shares that they
(c) (Interest is not payable) Magnolia will not pay interest on the Consideration, hold or together, as if there had been a single offer for a separate parcel
regardless of any delay in paying the Consideration or any extension of the consisting of all those parcels. Where a person holds at least one parcel of AU1
Offer. Shares that is in a CHESS Holding and another parcel of AU1 Shares which is in
an Issuer-Sponsored Holding, the person must follow the separate acceptance
BIDDER’S STATEMENT | 47
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
procedures applicable to CHESS Holdings and Issuer-Sponsored Holdings in Acceptance Form and ensure that it (including any documents
relation to each of those parcels. required by the terms of the Offer and the instructions on the
Acceptance Form) is sent so that it is received before the end of the
8.15 How to accept the Offer Offer Period to the address specified on the Acceptance Form.
(a) (All or Some of your AU1 Shares) The Offer is for all of your AU1 Shares, If your AU1 Shares are held in your name in a CHESS Holding (as
however, you may accept it for all or some of your AU1 Shares. indicated on your personalised Acceptance Form), you must comply
with the ASX Settlement Operating Rules. Your Controlling Participant
(b) (Acceptance procedure) To validly accept the Offer: (usually your Broker) should ensure that your acceptance complies
with these rules or advise you what you need to do to ensure that it
(i) For Issuer-Sponsored Holdings of AU1 Shares (Security holder complies.
Reference Number (SRN) beginning with “I” - as shown on your
personalised Acceptance Form): (c) (Mailing/broker instruction procedure) AU1 Shareholders with Australian
addresses should return their completed Acceptance Form by post or delivery
A. complete and sign the Acceptance Form in accordance with the to the address shown on the Acceptance Form. Shareholders sending a
terms of the Offer and the instructions on the Acceptance Form; completed Acceptance Form from outside Australia should return it by airmail,
and or if the AU1 Shares are in a CHESS Holding, make contact with their Controlling
Participant about the form of instructions that are required.
B. ensure that the Acceptance Form (including any documents
required by the terms of the Offer and the instructions on the As between an Accepting AU1 Shareholder and Magnolia, the Accepting
Acceptance Form) is sent to the address specified on the Shareholder bears the risk that their Acceptance Form is not received or that
Acceptance Form so that it is received before the end of the their instructions are not acted upon by their Controlling Participant.
Offer Period; or
(d) (Acceptance Form) You must follow the requirements on the Acceptance Form
(ii) For CHESS Holdings of AU1 Shares (Holder Identification Number (HIN) in accepting the Offer in respect of your AU1 Shares, including sending in any
beginning with “X” - as shown on your personalised Acceptance Form): required additional documents (for example, a power of attorney where you are
signing on behalf of another person or a certified copy of a grant of probate
A. if you are not a Participant, you must instruct your Controlling where you are executor of a deceased estate) or your acceptance will be invalid.
Participant to initiate acceptance of the Offer on your behalf in
sufficient time that it can process that instruction before the end (e) (When acceptance is complete) Acceptance of the Offer is complete once the
of the Offer Period; or completed Acceptance Form (together with all other documents required by the
instructions on it) has been received at the address specified in the Acceptance
B. if you are a Participant, you should initiate acceptance of the Form and the requirements of this Section 8.15 have been met, provided that
Offer in accordance with rule 14.14 of the ASX Settlement Magnolia may in its sole and unfettered discretion waive any or all of those
Operating Rules before the end of the Offer Period. requirements at any time. If Magnolia does waive an irregularity in any
purported acceptance for any AU1 Shareholder it is not obliged to act similarly
Alternatively, you may sign and complete the Acceptance Form in in relation to any other AU1 Shareholder.
accordance with the terms of the Offer and the instructions on the
BIDDER’S STATEMENT | 48
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
8.16 The effect of acceptance this Offer and any contract resulting from the acceptance of the Offer will
automatically terminate and your Acceptance Shares will be retained by you.
(a) (Effect of Acceptance Form) By signing and returning the Acceptance Form in
accordance with Section 8.15: (d) (Right to withdraw acceptance) If the Offer Period is varied in any way that
postpones for more than one (1) month the time for Magnolia to meet its
(i) you authorise Magnolia and each of officers and agents, including obligations under the Offer you may be able to withdraw your acceptance in
Security Transfer Australia, to correct any errors in, or omissions from accordance with section 650E of the Corporations Act. Magnolia will give the
the Acceptance Form necessary to: notice required by the Corporations Act at the time explaining your rights in that
A. make it an effective acceptance of the Offer in relation to your regard.
Acceptance Shares which are not in a CHESS Holding; and
(e) (Your agreement) By returning a correctly completed Acceptance Form, or
B. enable the transfer of your Acceptance Shares to Magnolia; and initiating or causing acceptance of this Offer under the ASX Settlement
(ii) if any of your Acceptance Shares are in a CHESS Holding, you authorise Operating Rules:
Magnolia and each of its officers and agents, including Security Transfer
Australia, to: (i) you irrevocably accept the Offer (and any variation of it) in respect of
and agree to transfer to Magnolia your Acceptance Shares, subject to
A. instruct your Controlling Participant to give effect to your the Conditions being fulfilled or the Offer being freed from some or all
acceptance of the Offer for those Acceptance Shares under Rule of them;
14.14 of the ASX Settlement Operating Rules; and
B. instruct your Controlling Participant on your behalf in relation to (ii) you represent and warrant to Magnolia, as a fundamental condition of
those Acceptance Shares in any way contemplated by the the contract resulting from your acceptance of the Offer, that:
sponsorship agreement between you and your Controlling A. your Acceptance Shares will at the time of your acceptance and
Participant and are necessary or appropriate to facilitate your transfer to Magnolia be fully paid up;
acceptance of the Offer.
B. you have not previously accepted the Offer;
(b) (Binding contract) Once you have accepted this Offer, and subject to fulfilment C. Magnolia will acquire good title to and beneficial ownership of
of all of the Conditions (unless some or all of those Conditions are waived in all of your Acceptance Shares, free from Encumbrances;
accordance with the terms outlined in this Offer) a binding contract with
Magnolia will result. D. you have full power and capacity to accept the Offer and to sell
and transfer the legal and beneficial ownership in your
(c) (lapse on non-fulfilment of Conditions) If: Acceptance Shares to Magnolia; and
(i) the Condition referred to in Section 8.7(d) has not been satisfied or the E. any attorney that accepts this Offer for you is empowered to
Offer has not been freed from that Condition no later than three (3) delegate powers under the power of attorney under any Section
Business Days after the end of the Offer Period; or of this Offer under which you authorise Magnolia or any of its
officers, agents, nominees (including Security Transfer Australia)
(ii) the other Conditions have not been satisfied or the Offer has not been to do anything on your behalf;
freed from those Conditions by the end of the Offer Period,
BIDDER’S STATEMENT | 49
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(iii) you irrevocably authorise Magnolia to notify AU1 on your behalf that C. authorise and direct AU1 to pay to Magnolia, or to account to
your address for the purpose of serving notices upon you in respect of Magnolia for, all Rights attaching to your Acceptance Shares,
your Acceptance Shares is the address specified by Magnolia in the subject however to any such Rights received by Magnolia being
notification; accounted for by Magnolia to you, in the event that the Offer is
withdrawn or avoided;
(iv) you will transfer, or consent to the transfer in accordance with the ASX
Settlement Operating Rules, all of your Acceptance Shares to Magnolia (vii) you agree that in exercising the powers conferred by the power of
subject to the conditions of the constitution of AU1 on which they were attorney set out in Section 8.16(e)(vi), Magnolia and its nominees are
held immediately before your acceptance of the Offer and acknowledge each entitled to act in the interest of Magnolia alone;
that your Acceptance Shares will, at the time of transfer of them to
Magnolia, subject to you receiving the Consideration payable to you (viii) you agree to do all such acts, matters and things that Magnolia may
under the Offer, vest in Magnolia free of Encumbrances and the name require to give effect to the matters the subject of this section (including
of Magnolia will be entered in the AU1 members’ register in respect of the execution of a written form of proxy to the same effect as this
those Acceptance Shares; section which complies in all respects with the requirements of the
constitution of AU1) if requested by Magnolia;
(v) you will be deemed to have irrevocably authorised and directed AU1 to
pay to Magnolia, or to account to Magnolia for all Rights in respect of (ix) with effect from the time on which all the Conditions have been fulfilled
your Acceptance Shares, except in relation to any Rights which Magnolia or freed you agree not to attend or vote in person at any general
has waived; meeting or meeting of a class of security holders of AU1 or to exercise
or to purport to exercise, in person, by proxy or otherwise, any of the
(vi) with effect from the time on which all the Conditions have been fulfilled powers conferred on Magnolia and its nominees by Section 8.16(e)(vi)
or freed, you irrevocably appoint Magnolia and each of its nominees as above, unless specifically authorised in writing by Magnolia to do so and
your attorney (acting by its sole signature or execution) to: on such terms and conditions as Magnolia may direct;
A. exercise all your powers and rights in relation to your (x) if and when the contract resulting from your acceptance of the Offer
Acceptance Shares to requisition, convene, attend and vote in becomes unconditional (even though Magnolia has not yet paid you the
respect of your Acceptance Shares at all general and other Consideration) you authorise Magnolia or its nominee to transmit a
shareholder meetings of AU1 or appoint a proxy to attend and message to ASX Settlement in accordance with Rule 14.17.1 of the ASX
vote in the manner directed by Magnolia on your behalf in Settlement Operating Rules to request the entry of any of your
respect of your Acceptance Shares at any such meeting; Acceptance Shares which are in a CHESS Holding, into Magnolia's
Takeover Transferee Holding;
B. execute all forms, notices, documents (including a document
appointing a director of Magnolia as a proxy for any of your (xi) if and when the contract resulting from your acceptance of the Offer
Acceptance Shares) and resolutions relating to your Acceptance becomes unconditional (even though Magnolia has not yet paid you the
Shares and generally to exercise all powers and rights which you Consideration) you authorise Magnolia to enter those of your
have as a registered holder of AU1 Shares; and Acceptance Shares which are an Issuer-Sponsored Holding into
Magnolia's name; and
BIDDER’S STATEMENT | 50
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(xii) you agree to indemnify and keep indemnified and hold harmless
Magnolia and each of its agents from and against any claim or action (ii) In relation to Acceptance Shares in an Issuer-Sponsored Holding,
against it or any loss, damage or liability whatsoever incurred by it as a Magnolia may treat the receipt by it of a signed Acceptance Form as a
result of you not producing your Holder Identification Number or valid acceptance of the Offer even though it does not receive the other
Security Reference Number or in consequence of the transfer of your documents required by the instructions on the Acceptance Form or
Acceptance Shares being registered by AU1 without production of your there is not compliance with any one or more of the other requirements
Holder Identification Number or Security Reference Number. for acceptance. If Magnolia does treat such an Acceptance Form as
valid, subject to Section 8.13, Magnolia will not be obliged to give the
To the extent that they are still capable of applying, the undertakings and Consideration to you until Magnolia receives all those documents and
authorities referred to in this section will remain in force after you receive the all of the requirements for acceptance referred to in the Acceptance
Consideration for your Acceptance Shares and after Magnolia becomes Form have been met.
registered as the holder of your Acceptance Shares. 8.17 Notices
(f) (Powers of attorney) If the Acceptance Form is signed under power of attorney, Any notice or other communication to be given by Magnolia to you under the Offer will
the attorney declares that the attorney has no notice of revocation of the power be deemed to be duly given if it is given in writing and is signed or purports to be signed
and is empowered to delegate powers under the power of attorney which under (whether in manuscript, printed or reproduced form) on behalf of Magnolia by any of
any Section of this Offer you authorise Magnolia or any of its officers, agents, its directors and is delivered to or sent by post in a pre-paid envelope or by courier to
nominees (including Security Transfer Australia) to do anything on your behalf. your address as recorded on the last copy of the Register supplied to Magnolia.
(g) (Validation of otherwise ineffective acceptances) Any notice or other communication to be given by Magnolia to AU1 may be given by
leaving it or sending it by mail to AU1’s registered office.
(i) Despite anything else in this Section 8 if Magnolia or its agent on its
behalf (including Security Transfer Australia) receives an Acceptance You or AU1 may give a notice to Magnolia in relation to the Offer or this Bidder's
Form in relation to a CHESS Holding: Statement by leaving it or sending it by mail to Magnolia's registered office which, at
the date of the Offer, is Shop 2, 80 Terrigal Esplanade, Terrigal NSW 2260, AUSTRALIA.
A. it is taken to be an instruction to which section 7 of ASIC Class
Order 13/521 applies; 8.18 Governing law
B. Magnolia may treat it as an acceptance of the Offer in The Offer and any contract that results from your acceptance of the Offer are governed
accordance with section 7 of ASIC Class Order 13/521; by the laws in force in New South Wales, other than rules as to choice of law to the
extent they are inconsistent with this clause. Magnolia and you submit to the exclusive
C. Magnolia or its agent may give any instructions under the ASX jurisdiction of the courts of New South Wales and of the Federal Courts of Australia.
Settlement Operating Rules authorised by section 7 of ASIC Class
Order 13/521; and 8.19 Glossary and interpretation
D. Magnolia may waive any matter in or in connection with the Section 9 of this Bidder’s Statement is taken to be part of the Offer.
Acceptance Form that it would be entitled to waive if Section
11.17(g)(ii) of this Bidder’s Statement applied.
BIDDER’S STATEMENT | 51
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
9 GLOSSARY AND INTERPRETATION AU1 means The Agency Group Australia Ltd (ASX Code:AU1).
AU1 Board means the Board of Directors of AU1.
9.1 Glossary
AU1 Director means a director of AU1.
The following terms have the meanings set out below unless the context requires
otherwise: AU1 Group means AU1 and its Controlled Entities.
Acceptance Form means the acceptance and transfer form sent with this Bidder’s AU1 Share means each fully paid ordinary share in AU1 on issue on the Register Date.
Statement.
AU1 Shareholder or Shareholder means a person shown as the holder of AU1 Shares in
Acceptance Shares means those of your AU1 Shares the subject of an acceptance of the the Register.
Offer.
Bid means the takeover bid constituted by the Offers made to the AU1 Shareholders.
Accepting AU1 Shareholder means a AU1 Shareholder that accepts the Offer for some
or all of their AU1 Shares. Bid Period means the period commencing on the date the Bidder’s Statement is given
to AU1 and ending one month later if no Offers are made under the bid or at the end of
Accounting Standards means the rules about how a company must prepare its accounts the Offer Period.
in, prescribed by or specified in or under, the Corporations Act.
Bidder’s Statement means this document, being the bidder’s statement of Magnolia
AGM means annual general meeting. under Part 6.5 of the Corporations Act relating to the Offer.
AGM Materials means the notice of meeting and all accompanying documents dated
Broker means a person who is a share broker and a Participant.
23 November 2020 sent to AU1 Shareholders concerning AU1’s AGM.
Announcement Date means 4 December 2020, being the date Magnolia announced to Business Day means a day on which banks are open for general banking business in
AU1 its intention to make the Offer. Perth (not being a Saturday, Sunday or public holiday in that place).
ASIC means the Australian Securities and Investments Commission. CGT means Australian capital gains tax.
Associate has the meaning given to that term in sections 12 and 16 of the Corporations CHESS means the Clearing House Electronic Sub-Register System operated by ASX
Act. Settlement, which provides for the electronic transfer, settlement and registration of
securities in Australia.
ASX means ASX Limited (A.B.N. 98 008 624 691) or the Australian Securities Exchange it
operates. CHESS Holding means a holding of AU1 Shares on the CHESS sub register of AU1.
ASX Settlement means ASX Settlement Pty Limited (A.B.N. 49 008 504 532). Condition means each condition of the Offer in Section 8.7.
ASX Settlement Operating Rules means the operating rules of ASX Settlement.
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Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
Consideration means the sum of cash payable by Magnolia to an Accepting Shareholder (g) an agreement to create anything referred to above or to allow anything referred
equal to the number of AU1 Shares for which the Accepting Shareholder accepted the to above to exist.
Offer multiplied by the Offer Price.
GST means the goods and services tax imposed under the A New Tax System (Goods and
Controlled Entity has the meaning given in the Accounting Standards. Services Tax) Act 1999 (Cth).
Controllers means, in relation to Magnolia, Mr Atkins and his spouse, Ms Camilla Holder Identification Number or HIN means the number used to identify a AU1
Overgaard. Shareholder on the CHESS sub-register of AU1.
Controlling Participant has the same meaning as in the ASX Settlement Operating Rules Insolvency Event means any of the events set out in section 652C(2) of the Corporations
and, without affecting that meaning, means, in relation to a AU1 Shareholder, the Act.
Participant in CHESS who is designated as the Controlling Participant for that AU1
Shareholder’s CHESS Holding of AU1 Shares (for example, that AU1 Shareholder’s Issuer-Sponsored Holding means a holding of AU1 Shares on AU1’s issuer-sponsored
sponsoring Broker). sub-register.
Corporations Act means the Corporations Act (Cth) 2001 and any regulations and other Key Management Personnel means the persons described as such in the 2020 Annual
instruments made under that Act. Report of AU1.
Encumbrance means:
Key Persons has the meaning given to that term in Section 3.2.
(a) a security interest to which the Personal Property Securities Act (Cth) 2009 Listed Documents means the following:
applies;
(a) Unaudited income statement of AU1 for the 3 months ended 30 September
(b) any other mortgage, charge, pledge or lien; 2020;
(c) any other interest or arrangement of any kind that in substance secures the (b) Unaudited balance sheet of AU1 as at 30 September 2020;
payment of money or the performance of an obligation, or that gives a creditor
priority over some or all unsecured creditors in relation to any property (c) AU1’s share and option registries at 4 November 2020;
(including a right to set off or withhold payment of any money);
(d) AU1’s group structure a provided by management;
(e) a right of any person to purchase, occupy or use an asset (including under an
option, agreement to purchase or security lending agreement);
(e) Draft October 2020 Convertible Note Agreement in connection with the Peters
(f) any other agreement or without limitation other circumstance or thing that Proposal;
prevents, restricts or delays the exercise of a right over property, the use of
property or the registration of an interest in or dealing with property, including (f) Final Convertible Note Agreement in connection with the Peters Proposal;
an injunction or other court order; or
BIDDER’S STATEMENT | 53
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(g) Copies of any and all mandates which have not been disclosed in the Offer Period means the period commencing on [Open] 2021 and ending on [Close]
Independent Expert’s Report and Financial Services Guide dated 23 November 2021, or such later date to which the Offer has been extended.
2020 (Report) prepared by Nexia Perth Corporate Finance Pty Ltd (Nexia
Australia); Offer Price means 4.0 cents per AU1 Share.
Participant has the meaning given in the ASX Settlement Operating Rules.
(h) Management Information relied on by Nexia Australia in the Report;
Peters means Peters Investments Pty Limited.
(i) Any and all non-public contracts or arrangements which would have rights of
termination or which would impose material obligations or penalties on AU1 if Peters Proposal means the proposal for the issue of AU1 shares and other securities the
Magnolia made the Bid and the condition in clause 8.7(a) is satisfied; and subject of the proposed resolutions numbered 3-7 in the AGM Materials (i.e. Agenda
items 4 – 8) as otherwise described in the AGM Materials.
(j) Any and all other non-public material information which would impact a
valuation of AU1. Proposed Peters Transaction means the transaction resulting in the completion of the
Peters Proposal.
Listing Rules means the listing rules of ASX as amended or varied from time to time.
Prescribed Occurrence means any of the following events or occurrences:
Macquarie means Macquarie Bank Limited.
(a) AU1 converts all or any of the AU1 Shares into a larger or smaller number of
Macquarie Facility means the current senior debt facility between Macquarie and the shares;
AU1 Group.
(b) AU1 or one of its Subsidiaries reduces its share capital in any way;
Magnolia means Magnolia Equities III Pty Limited.
(c) AU1 or one of its Subsidiaries:
Magnolia Group means Magnolia and all its related bodies corporate.
(i) enters into a buy-back agreement; or
Nexia means Nexia Perth Corporate Finance Pty Ltd
(ii) resolves to approve the terms of a buy-back agreement under section 257C(1)
Nexia Report means the report by Nexia in the AGM Materials and Nexia’s or 257D(1) of the Corporations Act;
supplementary report attached to AU1’s announcement to ASX dated 11 December
2020. (d) AU1 or one of its Subsidiaries issues shares, or grants an option over its shares,
or agrees to make an issue or grant an option over its shares (other than the
Offer means the offer to acquire AU1 Shares under the terms and conditions contained issue of AU1 Shares upon conversion of AU1 Rights);
in Section 8, as varied in accordance with the Corporations Act, and includes where the
context admits each separate offer on those terms to each person who is a AU1 (e) AU1 or one of its Subsidiaries issues, or agrees to issue, convertible notes;
Shareholder during the Offer Period.
(f) AU1 or one of its Subsidiaries disposes, or agrees to dispose, of the whole, or a
substantial part, of its business or property;
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Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(g) AU1 or one of its Subsidiaries grants, or agrees to grant, a security interest in Rights means all accretions and rights attaching to or arising from AU1 Shares, directly
the whole, or a substantial part, of its business or property; or indirectly, at or after the Announcement Date (including dividends and all rights to
receive them, bonuses or other shares of its profits or assets, as well as rights to receive
(h) AU1 or one of its Subsidiaries resolves to be wound up; or subscribe for shares, notes, bonds, options, or other securities and all other
distributions or entitlements declared, paid, made or issued by AU1 or any of its
(i) a liquidator or provisional liquidator is appointed to AU1 or one of its Subsidiaries).
Subsidiaries;
Securityholder Reference Number or SRN means the number allocated by AU1 to
(j) a court makes an order for the winding up of AU1 or one of its Subsidiaries; identify a AU1 Shareholder on its issuer-sponsored sub-register.
(k) an administrator of AU1, or of one of its Subsidiaries, is appointed under Section Subsidiary has the meaning given in the Corporations Act.
436A, 436B or 436C the Corporations Act;
Takeover Transferee Holding means the CHESS Holding to which AU1 Shares on the
(l) AU1 or one of its Subsidiaries executes a deed of company arrangement; or CHESS subregister are to be transferred after acceptance of the Offer.
(m) a receiver, or a receiver and manager, is appointed in relation to the whole, or Target’s Statement means a Target’s Statement issued by AU1 under sections 638 to
a substantial part, of the property of AU1 or one of its Subsidiaries, provided 640 of the Corporations Act as supplemented.
that a Prescribed Occurrence will not include any matter that is approved in
writing by Magnolia. Trading Day has the meaning given to it in the Listing Rules.
Register means the register of holders of AU1 Shares maintained by AU1 in accordance VWAP means volume weighted average price.
with the Corporations Act.
Voting Power has the meaning given to it in section 610 of the Corporations Act.
Register Date means [Register] 2021.
your AU1 Shares means such AU1 Shares as you were able to give good title to as at the
Regulatory Authority includes: date of the Bidder’s Statement but excludes any AU1 Shares that you transfer or agree
(a) any Commonwealth, State or local government anywhere in the world; to transfer before you have accepted the Offer.
(b) any minister, executive delegate or agency of any such government; 9.2 Interpretation
(c) ASIC; and (a) Annexures to this Bidder’s Statement form part of this Bidder’s Statement.
(d) ASX and any other regulatory organisation established under statute or the rules (b) Words and phrases to which a meaning is given by the Corporations Act, the
of any Financial Market (as defined in the Corporations Act). Listing Rules or the ASX Settlement Operating Rules have that meaning in this
Bidder’s Statement unless that meaning is inconsistent with the context in
Relevant Interest has the meaning given to it in sections 608 and 609 of the which the word or phrase is used.
Corporations Act.
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Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
(c) Headings are for convenience only and do not affect the interpretation of this
Bidder’s Statement.
(d) The singular includes the plural and vice versa and words importing any gender
includes the other gender, and references to persons include corporations.
(e) References to Sections are to sections of this Bidder’s Statement.
(f) References to paragraphs are references to paragraphs within the Section in
which the reference to the paragraph is made.
(g) References to time are references to Sydney Time, unless stated otherwise.
(h) References to “dollars”, “$” or “cents” are to Australian currency, unless stated
otherwise.
(i) The word “includes” is not a word of limitation.
(j) No ambiguity in any provision of the Offer or any contract formed as a result of
acceptance of the Offer will be construed against the interest of Magnolia as a
result of the fact that Magnolia was responsible for drafting that provision.
BIDDER’S STATEMENT | 56
Off-Market Bid for Magnolia Equities III Pty Limited
The Agency Group Australia Ltd
10. APPROVAL OF BIDDER’S STATEMENT
This Bidder’s Statement has been approved by a resolution of the sole director of Magnolia
dated 3 January 2021.
Signed for and on behalf of Magnolia by:
Mitchell Atkins
Sole Director
Magnolia Equities III Pty Limited
BIDDER’S STATEMENT | 57