The Merkin Group’s BoxRED to sell its stake in Trader Dealer Online to MDS Financial Group probably in return for shares in MDS

In an announcement to the Australian Stock Exchange this morning, accompanied by the half year financial reports to 31 December 2008 Sean Rothsey, Chairman of MDS Financial Group Limited stated:

“The Company’s on line trading joint venture with BoxRED Pty Ltd - Trader Dealer Online Pty Ltd was formed as a subsidiary of the Company for the purchase of certain intellectual property assets from Trader Dealer Pty Limited (Administrator Appointed), a subsidiary of the collapsed Opes Prime Group.

MDSnews Global was renamed Trader Dealer Online Pty Limited (“Trader Dealer Online”), which allowed existing clients to recommence trading on 17 April 2008.

The Company will be acquiring all of the shares in Trader Dealer Online Pty Limited in this quarter, recognising the integral part that the online trading platform has in the Company’s future.

Trader Dealer Online operates a discrete and personalised non-advisory execution Online or Phone trading service for retail, wholesale and institutional clients.

The Company’s Market Analyser is one of the most powerful integrated software solutions available on the market today. Clients can access data for shares, options, futures and currencies all from the one platform. The recent integration in the last quarter of this half-year period of the Market Analyser solution with the Trader Dealer Online platform means that when clients find a great opportunity to trade, they can place the order directly to the market from the same platform. Gone are the days of multiple user IDs, lots of open windows and numerous passwords to remember. One login, to undertake research and place the trade is now available, all from the one platform.”

MDS Financial Group Limited (MDS) is a public listed company on the Australian Stock Exchange and provides share market advice, analysis, data, online trading and research.

The Merkin Group, majority stakeholder in BoxRED has a substantial shareholding in MDS Financial Group Limited and Sean Rothsey is also Chairman and CEO of The Merkin Group. Speaking from Cooroy Sean said that “The Merkin Group see their strategic investment in MDS Financial as a continuing  part of their business notwithstanding the current adverse market conditions and low share price – which, I might add is consistent with the current market overall. We remain as a shareholder and will continue to do so as we see tremendous growth potential in this business. Separately, here at The Merkin Group we have partners in BoxRED and all of us want the continuing investment in Trader Dealer Online, and if that must be represented through a shareholding in MDS, well that is fine by us.”

“The integration of Trader Dealer Online across the MDS Market Analyser client base, and vice versa demonstrates how much conflict could arise in respect of marketing incentives etc in cross selling promotions and the like. To protect all shareholders interests MDS have to be careful to avoid potential situations of conflict – let alone consider the current confusion in the market and management complications. Trader Dealer Online is presently 51% owned by MDS and 49% owned by BoxRED. By Trader Dealer Online becoming a 100% owned subsidiary of MDS Financial these issues will be resolved.”

“So called “chinese walls “ are not impervious as we all like to think and the situation clearly would become untenable in the near future as both MDS and Trader Dealer Online grow. BoxRED only became involved because of competing acquisition  plans and also because the previous MDS Board needed the security of a financial partner in case of massive blowouts subsequent to  the hectic acquisition process. I have to say, in hindsight, I agree with that decision. That risk and requirement is deemed to have gone so this seems to be a logical and prudent step that is welcomed by the Boards of all companies – and by the shareholders - based on their conversations with me.”

“I cannot provide final details – needless to say Independent valuations and the normal due diligence and logistical processes are yet to be determined, at which time both MDS and BoxRED will make the appropriate announcements”.

“Separately  BoxRED’s Corporate division have been co lead manager and advisors to MDS Financial and BoxRED Media have provided marketing and creative services to both MDS and Trader Dealer. Notwithstanding the repeated statutory disclosure of these arms length relationships we are keen to see the potential for conflict diminish, as a matter of good corporate governance and practice and I am happy to say that we have virtually achieved that.”

Read the full announcement here