Former Thinc Destini executive deputy chairman David Collett is concerned that many shareholders will not receive enough “to wrap their fish and chips in” following the Axa acquisition.
He questions the “hope factor” of Axa’s offer towards the end of last year, as the majority of the return for the shareholders from the 100m figure quoted is based on future performance, therefore offering no guarantee.
Collett says: “I just think unless they grow by acquisition or by improved performance with substantially decreased overheads, with no time lost in creating leaner and meaner cost efficiencies, they risk not hitting their targets.”
He is re-entering the market with two hats – as chairman of the both consultancy The Innovative Group and Bespoke Hip Company, provider of home information packs.
He says Hips present a huge opportunity for mortgage advisers and welcomes the Government’s recent decision to delay the packs, saying: “There has been quite a rollercoaster ride on Hips but I firmly believe they will make house sales more transparent. Currently, there is no level playing field as even advisers within estate agents only see 30 per cent of buyers.”
Collett says Hips will completely change the position of the adviser, empowering them to advise on not only the mortgage but also its conveyancing status as they are armed with information about the seller up to 16 weeks before they sell.
He is already working with Intrinsic and Tenet’s Lime network and forecasts that Bespoke Hip Company to become one of the top five Hip providers in the country by next year with a 20m-plus turnover.
Despite his new mortgage ventures, Collett is concerned that many shareholders might fail to benefit as a result of Axa buying the company.
He says: “I hold 6.7 per cent of the company and my view is purely as a shareholder, not as a former director.” Collett says his opinion might be shared by other shareholders, saying he has faith in Axa as a parent but he would have liked to have seen more payment up front rather than relying on the “hope factor”.
Collett says: “It was a rock and a hard place, considering the terms of the offer versus the future of what might happen. I believe Axa will bring benefits to the group and I am delighted as I have always worked well with Axa. I think it is potentially an excellent partner. My regrets are from the Destini shareholders’ point of view.”
But, as Thinc Group chief executive Simon Chamberlain points out, Collett had the power to decline the Axa offer if he so wished.
Chamberlain says: “We received a 98.6 per cent vote in favour of the Axa offer. If David Collett had wanted to put a stop to the deal, he could have. I cannot see why, having taken his money, he is now complaining about the terms.”
When Thinc and Destini merged, they were split 50/50 – 200 million shares in total. Of their 100 million shares, the board of Destini had around 18 per cent of the shares with the rest distributed among the IFA businesses.
Collett says: “If I had been involved in the final negotiations it would have been my objective to have got real value for them up front. I feel a responsibility to them and am disappointed in the return that fellow Destini IFAs received.
“Only 16 per cent is actual – 4.8p of a potential 26p, the rest is a promise set to be delivered in 2010. This means the average IFA might only receive 50,000 to 100,000 at this stage, which, if they had been in the business for five or 10 years, is hardly a return. Some did not receive enough to wrap their fish and chips in.
“As there are still deferred payments to insurance companies, if the current loss is 6m, they have to make 10m in three years, after paying back the insurance companies, if we are to have any light at the end of the tunnel. That is quite a hill to climb.”
He says the Axa deal was “very canny” because of the 100m offered, 30m was to refinance debt and 40m was up front so less than 25 per cent ended up in the shareholders’ pockets.
He says the key members of the Thinc board had around 60 per cent of shares between them compared with the Destini board, which held around 18 per cent.
He says: “The distribution of share ownership is more heavyweight on Thinc’s than Dest-ini’s side. They deserve exactly what they get in terms of return but my concern is that the Axa offer is capped.
“With the 26p cap in place, we received 8m with a potential of 45m. Now non-board shareholders are reliant on the board to perform for them, which I just hope they can do.”
Axa spokesman Peter Webb says: “The simple point is that the deal was approved by the vast majority of shareholders, who took it because it represented value.”