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UK mortgages updates on strategic review

As part of its follow up to its strategic update announced on 22 July 2020, UK Mortgages Limited (UKML) has announced a review of future strategy. At the same time, it has reiterated its position that the possible offer from M&G Investment Management (MAGIM) materially undervalues the Company and its prospects. As such, UKML’s board says that it sees no merit in engaging with MAGIM on a proposal that it does not consider to be in the best interests of Shareholders. The Board says:

  • there has been no contact with MAGIM and MAGIM’s financial adviser since the unanimous rejection of the Possible Offer on 19 July 2020;
  • no further proposal has been received; and so
  • it confirms to Shareholders that it is not in discussions with MAGIM at this time.

Review of Future Strategy

In recent years, UKML’s Board has consulted with shareholders regarding then company’s strategy in light of the marked discount to NAV at which the company has been trading. As such, the revised investment strategy approved by Shareholders in August 2019 was designed in consultation with Shareholders to address this. UKML’s Board says that while the revised investment strategy was implemented in an appropriate and timely manner, it recognises that the circumstances in which UKML operates have evolved since then and says it would be prudent to review this again, in conjunction with the Company’s investment manager. Key takeaways:

  • The Board commits to commencing a review of future strategy once the Company is no longer in an Offer Period under the Takeover Code.
  • This review would consider various aspects of the Company’s strategy and operating model in current and expected future circumstances.
  • The review would be with the aim of maximising the value created for and delivered to Shareholders and would seek to provide Shareholders with a strategy that delivered an understood pathway to enhanced liquidity as well as a narrowing and removal of the discount at which the shares trade versus the NAV.
  • It is anticipated that the review would include but not be limited to the following:
    • the continuing merits of the existing strategy approved by Shareholders in August 2019;
    • the optimisation of assets, to release further funds;
    • the gradual sale of the Company’s assets to release further capital;
    • the reconstruction of the Company to facilitate its ongoing growth; and
    • the orderly winding down of the Company.
  • For the avoidance of doubt, the review would commence following the conclusion of the Offer Period and would not consider a formal sale process under the Takeover Code, a merger, or the solicitation of a buyer or buyers to make an offer for the shares or substantially all of the assets of the Company.
  • The Board would seek to conclude the review within a few months of the end of the Offer Period.
  • Shareholders would be consulted as part of this review and a Shareholder vote would be held to approve any recommendations made as a result of the review.
  • The Company will proceed with the implementation of its announced dividend and share buyback policies.

[QD Comment: It is no great surprise to us that UKML have pushed back forcefully against M&G’s offer (when we covered the initial announcement of this, we commented that, by swooping in at the current time, M&G obviously thought that the market was materially undervaluing UKML’s portfolio and that it could pick up a bargain). Nonetheless, the company continues to trade at a chunky discount and so the board cannot sit on its hands. The announcement of a strategic review is the next obvious step.]

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