Tale of two cities in Keybridge Capital clash

The COVID-19 pandemic has failed to dampen an ongoing corporate feud over Keybridge Capital.

Nick Bolton in his Melbourne office.

In a new era of co-operation between unions and big business, retailers and their landlords, and even Scott Morrison and the state premiers, a battle is continuing to rage between Sydney and Melbourne that not even the coronavirus can crush.

The stoush centres on the penny-stock cashbox Keybridge Capital, with its chief executive, Melbourne’s Nicholas Bolton, in one corner, and Sydney fund manager Geoff Wilson in the other. In between is a comedy of errors involving regional media mogul Antony Catalano, who is also a director of Keybridge.

As the COVID-19 pandemic has forced companies to stand down staff and eroded earnings, Mr Bolton and Mr Wilson have been trading barbs, filing ASX ­notices often late in the week as they wrestle over the fate of Keybridge.

Mr Wilson has lobbed four takeover bids for the company in the past 10 months, with Keybridge rebuffing him each time, while Aurora Funds Management, who counts Mr Bolton as its biggest shareholder, has launched a rival bid.

The two men are worlds apart. Mr Bolton made his name 11 years ago at the age of 26, pocketing $4.5m from a legal stoush over BrisConnections, which pitted him against corporate giants Macquarie Bank, Deutsche Bank and Leighton Holdings.

Meanwhile, Mr Wilson has built his reputation over four decades, with senior investment roles in the UK and the US before founding the eponymous Wilson Asset Management in 1997.

Geoff Wilson of Wilson Asset Management Picture: Stephen Cooper

The pair’s brouhaha over Keybridge is strange as it is complex. It began just before the ASX suspended the company from trading following the spending of $5m in an “incomplete deal” involving Mr Catalano’s Australian Community Media, which owns The Canberra Times and a suite of ­regional newspapers. Mr Catalano has also guaranteed the transaction if it can’t be completed.

The ASX has asked a series of questions involving the cash, which didn’t result in the issuing of shares in ACM, which Melbourne billionaire Alex Waislitz’s Thorney Investments owns in partnership with Mr Catalano.

The Weekend Australian understands that Thorney has never entertained the idea of doing business with Mr Bolton.

But, it is believed the $5m deal with Mr Catalano infuriated Perth-based businessman and former Keybridge shareholder Farook Khan, further souring his relationship with Mr Bolton. Mr Khan’s consultancy arrangements at Keybridge had been terminated a month earlier by Mr Bolton after he resumed his role as chief executive following a three-year directorship ban.

Meanwhile, Mr Wilson sensed an opportunity and seized it.

He lobbed his first bid — a conditional off-market cash offer of 7.5c a share, valuing the company at around $14m — in late June last year.

On Mr Wilson’s third attempt, he managed to secure all of Mr Khan’s 31,700,000 Keybridge shares.

But Mr Khan’s broker incorrectly processed the sale under the rival bid from Aurora, which was offering 7c a share instead of Wilson Asset Management (WAM), which increased its bid from 6.5c to 6.9c a share seven business days before the offer closed.

Mr Khan would have gained a windfall of about $30,000 under the Aurora offer. Nevertheless, the error angered Mr Khan and Keybridge later issued a statement to the ASX saying the WAM bid was void, while Aurora lodged a change in shareholder notice.

“The actions of Aurora in lodging the ADIT (Aurora Dividend Income Trust) substantial shareholder notice are highly inappropriate, patently incorrect and misleading and deceptive to the market as Aurora were fully aware that Bentley had accepted into the (Wilson Asset Management) offer for the whole of its shareholding in Keybridge,” Mr Khan’s investment vehicle Bentley Capital Management said in a statement to the ASX.

Aurora has since appealed to the Takeovers Panel. Meanwhile, Mr Wilson has lobbed a fourth takeover offer on April 28 — an unconditional all-cash offer priced at 6.9c a share.

In a letter to Keybridge shareholders, Mr Wilson said the offer represented a 29 per cent premium on the company’s net tangible assets, which have plummeted 70 per cent since December 2016.

Mr Wilson also attacked Keybridge’s management.

“Shareholders are exposed to protracted corporate governance issues. The ASX is currently conducting an inquiry into KBC as a result of numerous governance ­issues, including KBC’s 2019 ­financial report and KBC shares are suspended from trading.”

The ASX inquiry relates to a query over the $5m deal with Mr Catalano, who told The Weekend Australian on Friday it was an “incomplete deal”. In response to the ASX query, Keybridge (KBC) company secretary John Patton wrote last October that Keybridge had not sought the return of the $5m as it was still negotiating the transaction’s details.

“KBC has been, and remains engaged, in ongoing discussions with the counterparty to the proposed transaction in an attempt to resolve impediments to the transaction completing as originally intended by KBC.

“Until those discussions conclude, KBC has elected to not immediately call for the payment to be returned.

“KBC has, however, obtained a personal guarantee from the transaction principal to ensure that it has security satisfactory to the KBC board for the ability to obtain return of the payment, should KBC be unable to complete the transaction as originally intended by KBC.”

As for Mr Bolton, he told The Weekend Australian that he was surprised that Wilson Asset Management was continuing to press ahead with its takeover of Keybridge, given the mass disruption from the coronavirus pandemic.

“Given everything that’s going on in the world at the moment, I’m surprised WAM consider their fourth hostile takeover bid for a minnow like Keybridge to be the best use of their time,” Mr Bolton said.

“Geoff is very critical of a company he so desperately wants to buy.

“WAM seem to like all the individual investments we make, so why not work with us rather than against us?”