Shares in Sequoia Financial Group have been placed in a trading halt after the company flagged a delay in the divestment of its clearing business Morrison Securities.
In a letter to the ASX on Thursday, Sequoia requested that a trading halt be granted because of a delay by New Quantum Holdings in meeting its settlement obligation.
The transaction was set to proceed in stages, beginning with a deposit of $10.5 million. In late March, Sequoia confirmed that initial payments related to the divestment had been completed, including a non-refundable component of $3.15 million along with $7.35 million held in trust.
Under stage one of the transaction, New Quantum was due to make a $15 million “completion payment” by 31 May. Once the payment was made, Sequoia would receive the balance of the $10.5 million deposit and transfer 50.1 per cent of the shares in Morrison to New Quantum.
However, in its letter to the ASX on Thursday, Sequoia indicated that New Quantum had yet to meet its settlement obligation of stage one completion by the agreed upon 31 May deadline.
Sequoia requested that the trading halt continues until either it makes an ASX announcement regarding a delay in the settlement, before the opening of trading on Monday (5 June), or when it separately requests that the trading halt be lifted.
The firm said that it expects to make an announcement to the market “as soon as possible and, in any event, prior to the opening of trading on Monday June 5”.
“SEQ considers that the trading halt is necessary as otherwise trading in SEQ’s securities would continue on an uninformed basis,” Sequoia said.
“SEQ is not aware of any reason why a trading halt should not be granted, or any other information necessary to inform the market about the requested trading halt.”
According to the terms of the transaction outlined in Sequoia’s divestment announcement in March, the firm would retain the $3.15 million it has already received as a “non-refundable break fee” in the event that the $15 million completion payment was not received by 31 May.
Meanwhile, the remaining $7.35 million of deposit money held in trust would be returned to New Quantum.
If the transaction still proceeds successfully, Sequoia will continue to hold 20 per cent of the shares on issue in Morrison.
Sequoia previously noted that the transaction would allow it to retain “a minority but viable interest in Morrison and provide the business with the capacity to capitalise on opportunities that both SEQ and NQ have recognised as important for the future growth of Morrison”.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.