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.