HFA Holdings (HFA) may have hit a snag in the possible merger with US fund manager Lighthouse Investment Partners LLC.
While HFA has confirmed negotiations between both groups are continuing, an issue in the negotiations is the potential overhang created by the remaining MFS Limited stake (19.3 per cent) in HFA and the likelihood that MFS will seek to sell its holding in HFA in the future.
MFS has stated its intention of seeking to continually recycle its capital in investments held.
In a statement released to the stock exchange HFA has agreed for MFS to transfer their holding in HFA to MFS Alternative Asset Limited.
“The board believes it is in the best interest of all HFA shareholds to remove the potential overhang arising from the MFS ownership of HFA shares, regardless of the proposed transaction with Lighthouse Investment Partners LLC,” the statement said.
“HFA is informed that MFS manages, via the wholly owned subsidiary company MFS Investment Management Limited, MFS AAL and owns 33 per cent of MFS AAL. MS AAL has a stated investment mandate to invest in alternative investment managers and it is a long term holder of such equity states.”
The transfer is being effected under identical terms to that of the existing MFS escrow agreement and the escrow period being extended by 15 months to 30 June 2009.
MFS AAL is targeting in excess of 300 million of investments under management before 30 June 2008.
MFS has given HFA an indemnity to a limit of $5 million concerning a potential transaction. At this stage MFS does not expect any liability to accrue from such indemnity.
In April, HFA confirmed it is in discussions with a United States fund manager with a view to a possible merger.
