High Court appointed interim liquidators to Warkworth Holdings Ltd after allegations high-profile investors Todd Strathdee and Andrew Guest improperly used a share buyback to seize control while plotting to do a deal with themselves as neighbours to subdivide land on Falls Road, Warkworth.
Strathdee and Guest are directors on Warkworth Holdings’ board. Value of bare land around Warkworth has increased markedly, due in part to improved access promised on completion of a new Puhoi-Warkworth highway. Borrowings of $47 million are secured over Warkworth Holding’s land; funding provided by minority shareholder New York-based Arena Global LLC and former shareholder Warkworth Retail Ltd. Arena has first claim on sale proceeds. Mr Guest was associated with Warkworth Retail; Mr Strathdee is associated with Arena.
With money due on loans standing at some $47 million, Warkworth Holdings had received a conditional offer for its land at $50 million. The High Court was told that some two weeks earlier a majority of Warkworth directors had agreed to a $42 million sale, selling to a company owned ultimately by Mr Strathdee. Two directors representing majority shareholder Foundation Developments Ltd objected to this sale. Around the same time, Warkworth Holdings bought back its shares then held by shareholder Warkworth Retail for zero consideration. Mr Guest facilitated the buy-back. Reducing the number of Warkworth Holdings’ shareholders created a board deadlock; having the effect of freezing management decisions. Arena also took steps to seize control of Foundation Developments’ shareholding in Warkworth Holdings under rights contained in a previously arranged shareholders’ agreement. If all fell into place, Arena Global would then have 100 per cent control of Warkworth Holdings.
Former shareholder Warkworth Retail and majority shareholder Foundation Developments allege that the $42 million sale orchestrated by Strathdee and Guest is at an undervalue, that the buy-back of Retail’s shareholding is in breach of the Companies Act and that the buy-back was engineered for an improper purpose.
Only after applying to the High Court for appointment of an interim liquidator did the two disgruntled shareholders learn a valuable easement was being negotiated between Warkworth Holdings and its neighbour to benefit joint development of the two properties. The company owning neighbouring land is controlled by Strathdee and Guest.
Justice Gault appointed interim liquidators to Warkworth Holdings, keeping open the possibility of a later challenge to actions of Strathdee and Guest. Days before this court hearing, Arena changed tack; exercising its rights as secured creditor, having a receiver take control of Warkworth Holdings’ land.
Warkworth Retail Ltd v. Warkworth Holdings Ltd – High Court (6.09.21)
21.148