Since February, two institutional shareholders, who were supportive of Downing Strategic’s managed wind-down, and who had voted in favour of adopting that investment policy, sold their holdings to Milkwood, an investor opposed to the managed wind-down. Milkwood now has a 28% stake in the company.
Downing Strategic was planning to return cash to shareholders via a B share scheme (which involves issuing B shares and then redeeming them). However, that scheme needed to be approved by 75% of shares voted at a meeting set up to achieve this. Milkwood voted against, blocking the scheme.
The board says “Other than shares controlled by Milkwood Capital Limited, a new investor opposed to the managed wind-down of the company, less than 0.28% of the votes cast voted against resolution 1. Given 56.65% of the votes cast (including discretionary) were in favour of resolution 1, showing continued support from the shareholders for the managed wind-down of the company and the distribution of cash proceeds, the board has decided today to declare a special dividend of 30 pence per share, equivalent to £13.98m, with a further special dividend of at least £3.7m (which would equate to 8 pence per share) expected to be made by 30 June 2024.”
“The board notes that the return of the cash proceeds by means of dividend may be less tax efficient for certain individual shareholders who do not hold their shares in a tax wrapper (for example, a SIPP or an ISA).”
The board is saving money by shrinking (one director is stepping down) and cutting fees by £5k each. The board has also agreed that the investment manager’s capital return fee will now be set at 0.5% of the total value of distributions made during the company’s managed wind-down, instead of its former proposed sliding scale.
[QD comment: This is unfortunate for everyone. Milkwood seems to have got involved too late in the process to hang onto any of the assets – though it does have enough votes to block a liquidiation – and shareholders are left with a less tax efficient exit route. Some may be deeply unhappy about this.]
DSM : Milkwood seeks to block Downing Strategic wind up