Artemis Alpha (ATS) has announced proposals to cancel its October 2021 25% tender offer and, instead, committing itself to a sustainable share buyback policy with the target of maintaining a narrow discount, similar to the tender price. Shareholders are to be offered an ‘advisory vote’ on the decision (this avoids the cost of publishing a full circular on the proposals).
Key features of the proposed share buyback policy:
- A target buyback volume of up to 25 per cent of the shares currently in issue over the three years to the AGM in 2024. The buyback volume is a target and will depend on the trading price of the Company’s shares, since the Company will not repurchase shares at a premium to net asset value.
- Share buybacks will target a discount level at the previously intended tender price, which would be set at 3% discount to net asset value, and take account of the additional estimated costs of the tender. Although the costs of the tender offer will inevitably vary depending on the percentage of shares tendered, the Directors estimate that this is likely to result in a tender offer at a discount of between 4% and 5% to net asset value. The current share price as at 08 October 2021 was at a discount of 3.9% to the net asset value per share.
- The Board has carefully considered whether it should implement a discount policy with explicit and absolute parameters, in particular a fixed discount target price, and has decided that whilst it is committed to use buybacks to maintain a narrow discount, including in adverse markets, it is more effective to maintain some flexibility. This approach will be reviewed regularly and the operation of the buyback overall will be reported and discussed in the Company’s annual report each year.
- The Board wishes to make clear that it remains its intention to offer shareholders at the time of the 2024 AGM the opportunity of a 25% tender offer.
- For the avoidance of any doubt, the Board may choose to continue to utilise share buy backs beyond the initial targets if it believes it is in the interests of shareholders as a whole.
- The Board is prepared for the possibility that demand for the share buyback may be higher than usual in the coming weeks and months as investors who might otherwise have tendered their shares seek to sell or reduce their holdings and will use its current authority to buy back 14.99% of shares and, if necessary, refresh these powers in order to meet this possible demand.
Background to the policy change
In its 2018 strategic review, ATS’s Board said that it would offer shareholders a 25% tender offer around the time of the October 2021 AGM and every three years thereafter, subject to the level of discount prevailing at the time.
However, over the last three years, the value of ATS’s unquoted holdings, as a proportion of the whole, has fallen significantly, with proceeds reallocated into a more focussed and liquid listed equity portfolio. The Company has also seen a significant improvement in performance since 2018, and, following consultation with its largest shareholders, ATS’s board says that it is clear that some of them are unlikely to participate in the tender. Given these factors, together with the substantial fixed costs that a tender offer would incur for shareholders, the Board has concluded that the 2021 tender offer is no longer in the best interests of all shareholders.
Instead of the tender, ATS’s board is committing itself to a sustainable share buyback policy with the target of maintaining a narrow discount, similar to the tender price. Since this represents a change of policy, the Board is offering shareholders the opportunity to vote on the suspension of the proposed 2021 tender offer. This vote only relates to the 2021 tender offer and the next tender offer is due to take place in 2024.
Comments from Duncan Budge, Chairman of Artemis
“When we devised the proposed tender, the Company was in a fundamentally different position from that which it has managed to achieve today. Through the action of the Manager, the liquidity of the portfolio has been transformed, performance has substantially improved and the Trust’s popularity and size has grown. We feel the option is now available to manage our discount and provide liquidity through a continuous share repurchase programme that would not compromise the management of the portfolio and would deliver better results for most shareholders overall than a tender in 2021.”
Comments from Kartik Kumar, Co-Manager of Artemis Alpha Trust
“Since 2018 we have worked hard at delivering a better outcome for shareholders. Our objective is to generate long-term outperformance and for the vehicle to be regarded as an attractive long-term savings vehicle by investors. Liquidity is paramount to achieving this, and so we are taking steps to create a stronger alignment between trading in our shares and the portfolio’s underlying liquidity.”