by Jonathan Shapiro
WAM Capital has launched a takeover bid for Wealth Defender Equities, Perennial Value’s $110 million listed investment company.
The $1.7 billion listed fund managed by Wilson Asset Management has made a conditional off-market takeover bid for WDE of 99¢ per share, a 3 per cent premium to the 96.12¢ net tangible asset value, and a 15 per cent premium to the last traded share price of 86.7¢.
WAM Capital had amassed an 18 per cent holding in Wealth Defender, which has underperformed the broader market since its $125 million listing, with the unit price declining by about 12.6 per cent compared to a 12 per cent gain in the broader share market.
Taking aim at the “perennial discount” of WDE’s share price relative to the pre-tax asset value, WAM said the fund manager had “underperformed its benchmark”.
A release by WAM also made reference to WDE’s decision in May to move to a “dynamic approach” to using portfolio protection, which it said represented a “substantive change” to the initial strategy of deploying hedging investors against unexpected market losses.
“Despite these issues, WDE’s board of directors has not employed any effective capital management initiatives to provide shareholders with the opportunity to exit their positions at or above the announced pre-tax NTA,” the WAM Capital statement said.
Wealth Defender had initially used options to hedge the portfolio against losses, but the strategy proved to be more expensive than envisaged, dragging on its returns.
If the bid is successful, WDE shareholders can either reman a WAM shareholder, or exit their position via “WAM’s on-market liquidity”.
Wilson Asset Management is the largest shareholder with an 18.5 per cent stake followed by Perennial Value Management with a 5.7 per cent stake. Former Woolworths chief executive Roger Corbett is the third largest shareholder with just under 4 per cent of the shares.