Third Point Investors (TPOU) has announced further details of its previously announced redemption offer, which was triggered because the average discount over the six months ended 31 March 2024 was over 10%.
The 2024 offer is for up to 25% of the company’s issued share capital. The redemption price is the NAV on or around 30 April 2024 less 2%. Shareholder redemption notices must be submitted before 1:00p.m. on 8 May 2024.
In order to satisfy any redemption requests, the company will redeem a portion of its holding in the underlying Master Fund. About 93% of redemptions will be satisfied in cash and approximately 7% in a participation note which represents the company’s pro rata share of the Master Fund’s legacy private investments plus a small cash reserve. Assuming the 2024 redemption offer is fully subscribed, the company will need to redeem approximately 25% of its shares in the Master Fund, triggering the receipt of additional participation notes. As a result, the direct and indirect proportion of the company’s remaining portfolio comprised of legacy private investments would increase to about 9%.
Planned additional discount triggered redemption offer
There is another potential redemption offer in 2027 which would be triggered if the average discount over the six months ended 31 March 2027 was over 7.5%.
Strategy review
However, the board is conscious that the discount is not reflecting what it feels is decent NAV performance being generated by the manager. So it is thinking about more radical action.
Dimitri Goulandris and Liad Meidar are being appointed as directors. Then a new startegy committee with these two on it plus an existing director Richard Boleat will be responsible for commencing a full review to consider how the company may best deliver value to shareholders going forward. The review will be concluded within a six-month period. The strategy review is not a formal sale process and the company is not inviting offers for it to be acquired. The committee will be charged with evaluating all possible options, including offensive M&A opportunities, investment strategy mixes, corporate continuation votes or further tenders, and potentially other innovative options. It will have the power to hire outside advisors as necessary so that it can consider the broadest range of possibilities. As part of the review, the company will seek shareholder consultation and input.
At the conclusion of the review, the committee will present its findings to the board and shareholders will be asked to approve any new proposals, if appropriate. If the review doesn’t come up with a plan, the board will likely hold a continuation vote.
Dimitris and Liad were appointed at the manager’s suggestion, which might raise concerns about the independence of this committee, so the board has gone out of its way to say otherwise “Their relevant experience is in markets, mergers and acquisitions, and asset management, and they will bring important new perspectives to the board at this time. Mr. Goulandris and Mr. Meidar have been introduced by the investment manager, but the board has satisfied itself after due enquiries, including taking references using Cornforth Consulting, that they are independent of the investment manager and they have each confirmed to the board that they understand the responsibilities of directors to act solely in the interest of the company and thus of all shareholders. In accordance with the company’s Articles of Incorporation, both new directors will be put forward for election at the annual general meeting of the company to be held in May 2024, and the board will recommend that shareholders vote in favour of both their respective elections.”
[QD comment: This is a really unusual situation and it is going to be fascinating to see what the strategy review comes up with. One thought we had is that the company could free up cash by redeeming more of the Master Fund and then use this to fund an opportunistic bid for one of the investment companies trading at wide discounts to NAV.]
TPOU : Radical action coming at Third Point Investors?