The stoush involving Rural Funds Management unitholders disgruntled about its proposed chicken, wine and almond merger has progressed to court.
On 2 December, the Victorian Supreme Court will hear the application to halt a meeting for RiverBank unit holders to vote on RFMs plans to merge its chicken, wine and almond orchard funds into a single, listed real estate investment trust.
The dissenters say the unit price 'reset' is against the RiverBank constitution as it would wipe approximately 7.4% off the units, and that paying a 15% premium on the value of the Wine Fund assets would confer a benefit to this fund and therefore be an illegal related party transaction.
On its website, RFM says a company associated with the principal of Segue Financial Services, Sunset Amber Pty Ltd, served the court documents and this represents only a small portion of investors.
“It is disappointing that a small group of advisers from Melbourne’s inner east has elected to take this action given the overwhelming support demonstrated by votes received by RFM to date.”
It was “unusual” for such a small unitholder to have the capacity to meet expensive legal action costs, RFM said, before linking the group with ProTen, which has made an offer to buy unitholder interests in one of RFM’s funds – the Chicken Income Fund – for 70c per unit.
DeLancey Worthington is Segue Financial Services portfolio manager. He is a CFA charterholder, an actuary, and holds units in the RiverBank Fund.
He told Wealth Professional Sunset Amber is funding the court battle themselves.
“Sunset Amber is a trust with a trustee, that’s it. Segue is one of the advisers in the Investor Action Group. RFM is falsely claiming there’s financial links between Segue, Sunset Amber and ProTen. But there is no such thing,” he said.
“The only financial relationship is that some of Segue’s clients have accepted Proten’s offer to buy their Chicken Income Fund units. That’s it. There have been no promises or no discussions of money going either direction other than people wanting to sell their units.”
DeLancey is a member of the Investor Action Group (IAG), which has been in discussions with RFM for the past 12 months about alternative liquidity options for RiverBank and the Chicken Income Fund.
The group, which DeLancey said is made up of a number of different financial planning practices and represents “well over a hundred investors”, believes it is important to keep each fund functioning in the unlisted environment, and separately for different longer-term projections.
The RFM proposal involves diluting the value of existing unitholders, a reallocation of existing units, a loss of a $1.9 million tax asset and a reduction in RiverBank’s current net asset value, said DeLancey.
“The IAG feel strongly that what RFM is doing is not in the best interests of investors. I can see some fundamental flaws in what RFM is proposing. They’ve locked the fund into extremely long term leases that have low indexation rates.
“But the expenses of the fund are subject to inflation. And the projections they’ve done to show how the fund will perform have projected low interest rates and low inflation rates. So I believe they’ve painted too rosy a picture on how this fund will behave.”
Court proceedings mean the unitholders meeting has been postponed until at least 9 December.
Financial advisers against rural funds merger