Amalgamated Holdings is controlled by the Rydge family with movie and
tourism investments. That however, doesn’t make it a good investor, as
some big investors are finding out.
There are three upset institutions in Sydney today. Their investments
in the Rydge-family controlled Amalgamated Holdings are hurting after
Amalgamated’s involvement in the German movie screen business ran
aground to the tune of almost $90 million.

There seems little than can be done and with another deal last year
with the Kirby family of Melbourne, Amalgamated is looking at losses of
around $120 million in a year. And there’s no certainty the red ink has
stopped.

Amalgamated is a key company in the Rydge family empire. It owns movie
houses here and in Germany, ski interests at Thredbo, the Rydges Hotels
chain and cruise operations on Sydney Harbour and elsewhere.

Its major shareholder is the Rydge family investment group, Carlton
Investments, but there’s one of the old incestuous Sydney-style cross
shareholding arrangements because Amalgamated and Enbeear own 61 per
cent of Carlton.

The Packer family used to have a similar arrangement when Consolidated
Press was listed in the early 80s. A major shareholder in
Consolidated Press, Cairnton, was 49 per cent owned by Consolidated
Press. It is also similar to the now unwound link between Brickworks
and Washington Soul Pattinson, run by the Milner family, another ‘old’
Sydney business family.

On Wednesday, Amalgamated revealed a $70 million writedown of the
German movie house investment, knocking the share price down 8 per cent
and more on the day, with another smaller fall on Thursday to the
lowest level since last December, just after the company lifted its
stake in the German joint venture to 100%.

The news won’t please the three major institutional holders in
Investors Mutual, Maple Brown Abbott and Perennial Value. Investors
Mutual has been a regular buyer since June last year, lifting its stake
to over 8 per cent by last month. Some of the purchases last year were
under current prices, but the April purchase is underwater and
investment chief Anton Tagliaferro won’t be happy.

For Maple Brown, its another hiccup after being stuck as a big
shareholder in the under performing Mayne Group, while Perennial won’t
be pleased as it values its reputation as a value investor and clearly
there’s not much value in Amalgamated at the moment.

A look at the board and the company’s activities last year pose a few questions.

Alan Rydge is chairman and he is a director of the family company
Carlton Investments and a further company called Enbeear, a major
shareholder in Carlton. Another director, Mr G.L. Herring is a director
of both Carlton and Enbeear.

Carlton and Enbeear control just over 45 per cent of the company, so for all intents and purposes its part of the Rydge family.

A third common director is John Howard’s favourite accountant, Anthony
Clark, who is also a director of Telstra as well as being on the boards
of both Amalgamated and Carlton.

Tony was a former NSW head of accountants, KPMG, and both Amalgamated and Carlton’s auditor is KPMG.

AMP Director Meredith Hellicar is another director. Together with her
involvement with James Hardie Meredith knows a lot about companies
under pressure and she should be a ready source of advice to Al Rydge
when some upset shareholders coming a knocking on the boardroom door.

Investment banker, Tom Ford, is another director. Other directors are
Ron Graham, who is an accountant and the CEO, Mr D.C. Sergeant.

The bottom line is that the company has four insider directors to three
outside independents, which reflects the Rydge family control. Hardly
the best way to handle problems.

And problems there are in Germany and in the relationship with the
Kirby family company VRC, the major shareholder in Village Roadshow,
which is a partner in movie houses in Australia with Amalgamated’s
Greater Union arm.

Amalgamated sold its 34%stake in VRC to the Kirby family last year for
$46 million, not only taking a $35.1 million loss on the deal, but
getting only $20 million up front with the remaining $26 million to be
paid in three years time. That’s a punt on the future, given the
problems within the Kirby family empire in the past couple of years.

But the German movie investment beggars belief. The company has
had an involvement in the German movie house business since 1998, but
in April of last year its 50%-owned arm, Kieft & Kieft Film
theatre GmbH with a third party, bought the UFA-Theatre GmbH & Co
group of cinemas (late called Neue Filmpalast), and Amalgamated and its
partner because the biggest movie operator in Germany. There was a cost
of $A3.5 million to Kieft & Kieft.

Then in late November last year, Amalgamated announced that a wholly
owned subsidiary, Great Union International GmbH had agreed to acquire
the other 50% stake in Keift & Keift from the Kieft family. That
meant Keift & Kieft would be 100% owned and Neue Filmpalast would
be 50% owned. The cost was put at $A12.5 million.

Then on Wednesday of this week, news of a $A70.4 million writedown in
the investment in Kieft & Kieft. Some $A65 million in goodwill and
a further $A5.4 million to cover unperforming film sites and other
provisions.

Now while Amalgamated warned last November of the tough conditions in
Germany, it obviously has got a lost worse, and investors would be
excused for asking, what’s happened?

Total losses around $89 million so far in lost or doubtful investments
and the writedown. And possibly more to come as Amalgamated is
reviewing its exit from the Neue Filmpalast joint venture, but that
could cost another $A7 million.

Why was $12.5 million paid to the Kieft interests in November, when
clearly six months later the business is worth $70 million less?

Was due diligence adequate? Was it done, even though Amalgamated was a
partner in the business? Clearly something went wrong or wasn’t
disclosed and the German movie houses haven’t been doing the business
to justify goodwill in the books.

For all its establishment board links, Amalgamated joins the long, long
list of controlled companies to have stuffed up royally moving
overseas. The losses from the Kirby involvement relate to historical
deals between the two families.

Not smart at all. Its to be hoped Investors Mutual, Maple Brown and
Perennial get into the board and management at the annual meeting later
in the year.

Peter Fray

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