Zenith Investment Partners, controlled by private equity firm Five V Capital, and Chant West Holdings, a listed company which includes the software business Enzumo, are considered likely to reach an accommodation regarding their previously agreed merger. Zenith called off its part in the merger last week, but Chant West is disputing the action.
While none of the key parties would comment on the development, industry chat has it that Five V Capital is taking advantage of the current market uncertainties due to Covid-19 to negotiate a lower price for Chant West.
Zenith, through its vehicle CW Bidco Pty Ltd, announced on February 18 that it would pay $12 million for the research and advisory part of the listed company, CWL. CWL was likely then to sell the Enzumo financial planning business separately.
It was generally considered a good deal, by both the market and the industry, which would marry the strengths of Zenith in the wholesale (financial planning) and retail markets with those of Chant West among the big institutional investors across commercial and not-for-profit sectors.
Chant West went ahead with its extraordinary general meeting of shareholders as planned last week, notwithstanding the drama. The meeting approved the sale of the main Chant West research and advisory business and also a change of name for the listed entity to Consolidated Financial Holdings.
CW Bidco alleges that there was a material adverse change in the Chant West business since February 18. In its ASX announcement, coupled with a request, which was granted, for a trading halt to its stock, CWL said: “The company, having regard to the financial condition and performance of the business in the current financial year and specifically between the signing of the BSA (business sale agreement) and the date the letter (from CW Bidco) was received, rejects the allegations… Chant West delivered a positive EBITDA in the first half of FY2020 and we remain confident it will continue this trend in the second half of the year.” CWL said it intended to hold CW Bidco to the terms of the BSA as originally signed.
The trading halt is scheduled to be lifted today, April 6, but this could be extended if required. The CWL share price hit a high of just over $1.00 after the sale announcement and has continued to maintain a price in the mid 90c range subsequently.
Zenith also bought the NZ research firm FundSource last year.
Phillip Carter, the Chant West chairman, who is also a private equity manager at Kestrel Capital, conducted the EGM with little discussion from the floor and both motions were carried by big margins. Over to the lawyers.
Greg Bright is publisher of Investor Strategy News (Australia)