Baker Steel Resources Trust has published more detail on its proposed expansion plans. Shareholders get to vote on elements of the proposed plans at an EGM being held on 23 February 2015.
- They will acquire a portfolio worth £18.6m and potentially buy a further £60.7m worth of investments – issuing new shares to pay for this. Some of the £18.6m of assets (18 assets worth £13.3m) are coming from the Genus Natural Resources Master Fund (a fund owned 75% by Trevor Steel and David Baker), some are coming from the Genus Dynamic Gold Fund (3 assets worth £5.3m). The £60.7m of assets would come from clients of Salamanca Group Advisers Limited. If these negotiations come to fruition, Salamanca would become an additional investment adviser to the fund.
- They plan to try to raise up to £100m by way of a placing and open offer.
- If they don’t get the whole £100m at the first attempt, they’ll keep trying to find it over the course of the next 12 months.
- Introduce a discount control mechanism from August 2015. This would, on a monthly basis, kick-in if the shares were trading at a 15% discount and would involve the company returning half of whatever cash the fund had received from realisations over the previous six months via a buy-back. They also plan, regardless of what’s happening with the discount, to hand back 15% of realised gains to shareholders via share buybacks, tender offers and dividend payments 9whichever method the Board deems appropriate.
- Scrap the liquidation vote planned for 2015 that would have been held under the company’s Articles but hold votes in 2018 and every third AGM thereafter.
The new shares that they are issuing will be priced at net asset value where they are being issued in exchange for unlisted investments and at a 15% discount to net asset value for everything else. This means that it is likely that existing investors will be diluted. They will be able to buy shares in the open offer at a discount just like new investors however. The quid pro quo for being diluted is the introduction of the discount control mechanism. if this works, investors could see the share price rise even though the net asset value has fallen (all other things being equal). They also say that the company’s ongoing charges ratio should fall post the expansion of the fund.
There are various arrangements in place to try to deal with the possibility that a concert party is created (a group of shareholders with a common agenda) that owns too much of the company – once a concert party owns too much of a company, it may be required to bid for it.
BSRT : Baker Steel unveils expansion plans