Wilson and Cadence lead RHG revolt

Wilson Asset Management and Cadence Asset Management are taking steps to persuade the board of RHG Limited to reconsider plans to delist the company, and yesterday they gave notice of a proposal to remove two directors from the board, to force consultation over the plan.

The two fund managers released a letter to RHG yesterday, via the ASX, advising on their plans to call a special meeting to remove Greg Jones and John McGuigan as directors. They propose the appointment of three new directors; Paul Jensen, Malcolm McComas and Gabriel Radzyminski.

Last month, RHG released details of the 88 cents per share buyback plan first announced in late 2010.

One aspect in the RHG board's plan is that the company will drop its listing following the buyback, a step regarded as a ploy to persuade reluctant shareholders to sell into the buyback.

With RHG's executive chair, John Kinghorn, and his son, Geoffrey Kinghorn, either not participating or only partly participating in the share buyback, the pair seem likely to end up with control of the rump of a once vibrant home-loan financier that now manages a $4 billion back-book of mortgages.

An extra irritant for the activist shareholders is the adequacy of the offer of 88 cents per share in light Deloitte Corporate Finance's conclusions that the shares are worth much more than $1 a share.

While RHG has said it couldn't find any buyers for its back book in late 2010 "at any price", the rumour mill suggests there were a number of credible offers, though perhaps none became conforming offers on RHG's timetable.

In the current market, there may be even more parties willing to bid for profitable mortgage books. A number of bank and non-bank bids are in preparation for the $5 billion back book of GE Money, which has a slightly lower asset quality than that of RHG.