Tuesday, May 31, 2011

Homburg "vigorously contesting"...

In the May 30th issue of the news website Allnovascotia.com, which does in-depth coverage on business affairs in Atlantic Canada, there were two thorough articles on the struggles of Richard Homburg’s publicly traded company, Homburg Invest Inc.

According to allnovascotia.com’s David Bentley, the Dutch’s Authority for Financial Markets (AFM) are asking Homburg Invest Inc. to remove founder and controlling shareholder Richard Homburg from the company.

In Bentley’s pieces, he sheds light on some of the managerial changes and turmoil that have made headlines for Homburg Invest Inc. in the last few months – most notably that Richard Homburg has stepped down from being chairman and CEO.

Homburg Invest Inc. is traded in Dutch and Canadian markets so they must appease both countries’ set of laws and regulations. Simply removing Mr. Homburg from the board and taking away his shares doesn’t mesh with existing Canadian financial laws. Hence, a dilemma for Homburg Invest Inc.’s board. Bentley says that Homburg Invest Inc. CEO Jan Schoningh is “vigorously contesting” the AFM’s decision, which is based on a dispute between Dutch tax authorities and Mr. Homburg.

Schoningh laments that the AFM didn’t suggest a legal method for removing Mr. Homburg.

“The board cannot itself legally reduce the control Mr. Homburg exercises through his shareholdings, nor can it compel Mr. Homburg to reduce his control… Further, Homburg Invest Inc. cannot restrict, or in any manner vary, the voting rights that attach to those shares. As a consequence, Homburg Invest Inc. is left in the difficult position of being unable to carry out these aspects of the institution.”

The Homburg Invest Inc. board has created a committee of legal counsel and financial advisors to make a strategy that will benefit shareholders while Mr. Homburg’s dispute is resolved.

But questions were raised about how long it’s been since Mr. Homburg knew the AFM was going to take action. Bentley suggests that it would have been sooner, rather than later. And if that is true, then Homburg Invest Inc. did not fulfill their obligation to disclose that information to shareholders in March 22 and May 11 releases.

Bentley points out that Homburg Invest Inc. and the AFM have had a ‘rocky’ relationship, citing an example where the company was fined for failing to disclose certain details about its corporate structure. Homburg Capital BV, another Richard Homburg-founded company, was fined 192,000 Euros by the AFM for providing investment advice to clients without the proper license necessary.

Homburg Invest Inc. shareholders have been suffering since the world financial meltdown. Both classes of shares were consolidated on a 10-for-1 basis in late 2008. At the time, they were trading in the $11 - $13 range. Share values are also dropping because Homburg’s corporate activities are prone to funnel management fees to his private companies.

Richard Homburg immigrated to Nova Scotia in 1972, where he began building a Halifax-based real estate portfolio. Most of his assets were financed by cash raised in Europe via limited partnerships. He returned to Amsterdam twenty years later and opened Uni-Invest NV, a publicly traded real estate company. Homburg Invest Inc. was founded in 2001 and featured a Western-Canada focus, heavily financed by European commercial properties, until it took a hit in the 2008 financial meltdown. Most of his best Canadian assets were hived off to Homburg REIT (which is also seeing lower share prices) but Homburg Invest Inc. itself has a portfolio that is 87% European properties, and it is struggling.

As of March 31, this year, it had total assets of $2.1 billion, but only $100 million in equity once long - term debt and other obligations were factored in.

For more information, please sign up for Allnovascotia at http://www.allnovascotia.com/

The following news release is from Homburg Invest's own website...


HALIFAX, May 26, 2011 /CNW Telbec/ - (TSX: HII.A HII.B) (AEX: HII) - Homburg Invest Inc. ("HII" or the "Company") announced today that the Company has received an instruction (the "Instruction") from the Authority for Financial Markets ("AFM") in the Netherlands requiring it to appoint two directors or officers who are residents of the Netherlands.

The AFM also instructed HII to remove HII's controlling shareholder Richard Homburg as a decision-maker and person of influence in the Company. The AFM did not specify any process or means by which the Instruction to remove Mr. Homburg as a person of influence should be carried out.

The Board of Directors is taking steps to comply with those elements of the Instruction that it can legally undertake, such as submitting candidates to the AFM for Netherlands-based directors. HII cannot comply with any aspect of the Instruction that is not enforceable under, or would result in a breach of, Canadian or Dutch law. The Board of Directors of HII cannot itself legally reduce the control Mr. Homburg exercises over HII through his shareholdings nor can it compel Mr. Homburg to reduce his control. The Board has no authority under HII's governing law, the Alberta Business Corporations Act, to require Mr. Homburg or any other shareholder to reduce that holder's ownership in HII, or to not vote that holder's shares. Further, HII cannot restrict or in any manner vary the voting rights that attach to those shares. As a consequence, HII is left in the difficult position of being unable to carry out these aspects of the Instruction.

In its Instruction to the Company, the AFM relies on information it apparently received from Dutch authorities and from Mr. Homburg about tax assessments, which have not been resolved and which are being contested by Mr. Homburg, and other personal matters between Mr. Homburg and the Dutch tax authorities.

"HII is vigorously contesting the AFM Instruction, which is based on a dispute between the Dutch tax authorities and a private individual (Mr. Homburg)," said Jan Schöningh, President and Chief Executive Officer of HII. "HII will continue to explore all possible recourses available to it in order to protect HII and its stakeholders. I want to reassure shareholders that there is no material financial impact of this Instruction on the Company and that we continue to focus on building value for shareholders."

About Homburg Invest
Homburg Invest, with its head office in Halifax, Nova Scotia, owns and develops a diversified portfolio of quality real estate including office, retail, industrial and residential apartment and townhouse properties throughout Canada, the United States and Europe.

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