Geoff Wilson’s WAM Capital will absorb junior listed investment companies Westoz Investment Company and Ozgrowth in a triple all-share merger that gives WAM Capital more than $300 million of assets for $271.5 million.
Westoz and Ozgrowth shareholders will receive WAM Capital scrip as part of the agreed deal, which was revealed to the market on Thursday before the opening bell. The transaction takes WAM Capital’s assets to $2 billion.
The deal is accretive for WAM Capital, as the new shares will be issued at a premium to the value of its underlying assets. Mr Wilson, the chairman of Wilson Asset Management, said: “The growth of the LIC sector through corporate activity has strengthened the industry, creating economies of scale, providing opportunities for smaller players to grow and delivering liquidity to investors.
“The LIC industry has significant room for continued growth.” Mr Wilson added that the younger generation of investors, known for their preference for exchange traded funds, are participating in LIC investing.
Westoz and Ozgrowth are presently managed by Westoz Funds Management, under the Perth-based Euroz Hartleys Group, which itself is a shareholder in both LICs (as is WAM Capital). The listed Euroz Hartleys is the product of the 2020 unification of the two Western Australian wealth management groups.
A scheme meeting is likely to be held in April 2022 for Westoz and Ozgrowth shareholders to vote on the proposals, which are not interdependent. Ozgrowth shareholders will receive 0.168 WAM Capital shares for each Ozgrowth share held, for example, were the deal struck on their respective November 30 valuations, and Westoz shareholders 0.652 WAM Capital shares for each Westoz share held.
The eventual level will be based on a ratio of WAM Capital’s share price and the pre-tax valuation of the target LICs’ underlying assets, or net tangible asset value (known as NTA), plus a premium of 7.5 per cent.
Westoz and Ozgrowth chairman Jay Hughes said investors would benefit from superior liquidity and closer alignment of the share price to NTA. All parties have entered a scheme implementation agreement.
Separately, on Wednesday, WAM Capital came closer to securing another LIC target, the PM Capital Asian Opportunities Fund, after its directors recommended shareholders accept WAM Capital’s offer. The PM Capital LIC fell narrowly short of defeating the WAM Capital offer at a shareholder vote earlier this month, which failed to secure the necessary 75 per cent support for a merger with the PM Capital Global Opportunities Fund, and spoil a protracted two-way takeover battle.
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