Baring Emerging Europe has announced proposals to return capital to shareholders through a tender offer of up to 10 per cent. of the issued share capital of the Company at a 2.5 per cent. discount to net asset value per share as at 24 January 2017. The Company is also proposing a change of its investment policy and has approved certain changes to the Company’s approach to discount management. The company says that a circular setting out the full details of the Proposals and the changes to the Company’s approach to discount management and containing a notice of general meeting is being published today on 15 December 2016.
In 2013, the board set out a discount management target of maintaining the “Discount to NAV” for any given financial year at an average of under 12 per cent., failing which a tender would be offered to shareholders. During FY16, despite the Board’s efforts to manage this process, the Discount to NAV has averaged 14.4 per cent, which means that the conditions for a tender offer have been triggered.
Notwithstanding the proposed implementation of the Tender Offer, the Board also believes that it is in the Company’s interest that it takes certain steps to address the long term viability of the Company’s approach to discount management. It is the Board’s view that the current approach to discount management diverts the Company’s resources into liquidity management in order to finance buy-backs, and gives the Company’s investment manager an implicit time horizon, which is shorter than that of its natural investment process. Furthermore, the Board recognises that the shrinking of the Company through repeated tenders and large buybacks risks reducing liquidity for shareholders and restricting the investor audience for the shares. The Board believes that this could lead to the Company becoming less relevant for its shareholders and in turn increase the difficulty of controlling Discount to NAV going forward. In order to address these problems, the Board has approved the implementation of a revised approach to discount management, subject to the shareholders’ approval of the Proposals and certain of the resolutions to be presented at the Annual General Meeting. The Board believes that the long term attraction of the Company’s investment strategy remains intact and that the proposed change in the approach to discount management will ensure that the Company’s investment manager is able to focus on achieving the optimal results for shareholders without the concern of liquidity management in the face of a shrinking capital base.
Baring Emerging Europe proposes tender offer, investment policy changes and changes to its DCM : BEE