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REA Group is exposing itself to political and cultural risks in its attempted takeover of iProperty Group, the takeover target has revealed.
The iProperty board has endorsed REA Group’s proposed $578 million acquisition, but warned shareholders ahead of a January 28 vote that the future is not risk-free.
According to a scheme booklet that iProperty presented to its shareholders, “there are a number of general risk factors as well as risks specific to iProperty and/or the industries in which it operates” that could materially affect the company’s future performance.
One risk iProperty identified was “political stability risk” in the countries where it does business, which include Singapore, Hong Kong, Indonesia, India, Thailand, the Philippines and Macau.
The company “operates in countries and a region that have historically been subject to changes in political power which can have immediate and significant effects on business”, according to the scheme booklet.
“For example, regimes in Thailand and the Philippines have in the past been subject to military coups and political instability. The future may contain further coups, military activity, revolutions and anarchy.”
The scheme booklet also noted the potential “language and culture risk” of iProperty inadvertently acting or communicating in a negative way.
“As iProperty operates across different countries employing different local languages and different cultures, there may be risks if senior management are not fluent in the languages of the regions in which they operate or are not knowledgeable of the aspects of each culture,” it said.
According to the scheme booklet, there is also a risk that the countries in which iProperty operates could introduce foreign ownership restrictions that may affect the company’s corporate structures as well as its ability to repatriate future profits.
“There is a risk that future legislation may negatively affect iProperty’s growth prospects and the value of its regional assets, thus having an adverse impact on iProperty’s business, financial performance and operations,” it said.
[Related: REA acquisition gets big tick from independent report]
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