by Jonathan Shapiro

Geoff Wilson’s WAM Capital is set to win its fight to gain control of $120 million listed investment company Wealth Defender Equities after the board advised shareholders to accept the takeover offer.

Wealth Defender chairman Alan Schoenheimer said WAM Capital’s offer of 1 WAM share for every 2.5 WDE shares should be accepted after independent expert Grant Thornton concluded it was “fair and reasonable”.

The bid, he said, was a significant premium to Wealth Defender’s volume weighted average price prior to the bid in late August and was above the post and pre-tax net tangible asset value at that time.

Mr Schoenheimer also told shareholders liquidating the company to realise the value of the assets was “not a realistic proposition” as the WAM offer was a premium to the realisation value that was unlikely to be achieved.

Mr Wilson said he believed the WAM Capital bid was “very fair” and in the best interests of both sets of shareholders.

“The quicker the the bid can be wrapped up the better for everyone involved,” he said.

​On August 30, WAM Capital, a $1.7 billion listed fund managed by Wilson Asset Management, made a conditional off-market takeover bid for Wealth Defender 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¢.

Wealth Defender shares gained 8.7 per cent to 94.5¢ on the day of the bid announcement – the level at which they closed at on Wednesday.

The fund 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 with a 12 per cent gain in the broader sharemarket at the time of the bid.

The bid is now conditional on more than 50 per cent of shareholders accepting the bid and several other clauses.

Wealth Defender shareholders can either remain a WAM shareholder, or exit their position via “WAM’s on-market liquidity”.

Wealth Defender, which is managed by Perennial Value, had initially used options to hedge the portfolio against losses, but the strategy proved to be more expensive than envisaged, and dragged on its returns.

In May, Wealth Defender moved to a “dynamic approach” to using portfolio protection, which WAM said represented a “substantive change” to the initial strategy of deploying hedging against unexpected market losses.

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.