Independent view on shares plan
An independent adviser’s report prepared by Simmons Corporate Finance has been distributed to 2 Cheap Cars Group shareholders to assist them in deciding how to vote on a share acquisition resolution agreed to by the company’s co-founders.
The 24-page document recounts that on July 28 this year the Sena trustees and the Williams trustees entered into a conditional agreement for the sale and purchase of shares in 2 Cheap Cars.
If it goes ahead, the Sena trustees will acquire the 13,679,934 ordinary shares in the group held by the Williams trustees at a price of 32c per share, which comes to a total purchase price of $4,377,578.88.
Simmons notes the acquisition arises from a breakdown in the relationship between the company’s co-founders, which was announced on July 19, 2022, when Williams and the company’s three non-executive directors resigned from the board.
The impact of the relationship breakdown resulted in a variety of adverse effects on 2 Cheap’s operations and governance, these are listed in the report as including:
• directors resigning and the eventual mass board walkout
• the company’s chief executive officer resigning
• a hastily convened new board established just prior to the company’s 2022 annual general meeting
• newly appointed directors Michael Stiassny as chair and fellow independent director Gordon Shaw having to spend significant time trying to right the ship, including Shaw stepping in as interim chief executive officer for a period
• the resignation of the company’s auditors
• the loss of the company’s bankers
• the need to appoint a new chief executive officer, Paul Millward. Since Millward’s appointment, there has been an almost complete replacement of the executive team.
“The implications of the share acquisition resolution not being approved by the non-associated shareholders are that the share acquisition cannot proceed and the Williams trustees will continue to hold 30.03 per cent of the company’s shares,” the report adds.
“Given that there has been a fundamental breakdown in the relationship between Sena and Williams, which has resulted in negative impacts on 2CC, this is unlikely to be beneficial to the company.”
Simmons explains the deal will result in the Sena associates’ control of the voting rights in the company increasing to 76.52 per cent, giving them the ability to singlehandedly pass any special resolution or ordinary resolution.
However, the non-associated directors told the advisers that they do not expect the acquisition to have any impact on the level of control exerted by Sena over the company’s operations.
The report continues that in the adviser’s view, the share acquisition is unlikely to have any significant impact on the attraction of 2 Cheap Cars as a takeover target.
“Given that Sena was instrumental in the compliance listing of 2CC in February 2021, his desire to take the company private is unlikely to be influenced by whether the Sena associates hold 46.49 per cent or 76.52 per cent of the company’s ordinary shares,” says Simmons.
“Dealing with just one major shareholding rather than two may make it marginally easier for a bidder looking to make a takeover offer.”
