Update: Third Point Investors reverses yesterday’s gains as shareholders owning 14% of the hedge fund, including Asset Value Investors and Evelyn Partners, join forces to oppose its transformation plan.
Angry investors holding 14% of Third Point Investors (TPOU) have formed an action group to oppose the hedge fund’s controversial plan to transform itself into a US pension provider next month.
Asset Value Investors, Evelyn Partners, Almitas Capital, Staude Capital and Metage Capital said on Wednesday evening that they had formed the TPIL Investor Group to fight for a “fair deal” for shareholders in Dan Loeb’s underperforming investment company.
They believe an earlier announcement by the £462m London-listed investment company of improved exit terms for investors, who do not want to participate in the proposed reverse takeover of Malibu Life Reinsurance, does not address their fundamental concerns.
Having complained to the Financial Conduct Authority and Takeover Panel, the dissenting shareholders are pushing for a vote of independent shareholders next month, excluding Third Point, which they could be in a strong position to win if 50% support is required. The company says it has the support of 45% of shareholders, including 25% held by the manager.
The rebels said, “based on our initial review, we continue to believe the terms and design of the proposed transaction, as revised by the TPIL board and Third Point (as the largest shareholder and manager), and proposed fairness opinion by Jefferies as FCA sponsor, represent a collective failure to address multiple conflicts of interest and protect the financial interests of independent shareholders. It still denies shareholders a full exit at a fair price and does not address the potential change of control arising under the Takeover Code.”
In its improved offer, Third Point said investors could sell their holdings at 4.8% below net asset value (NAV), compared to the 12.5% discount proposed in May.
TPOU dollar shares jumped 3.7% to $27.57 on Wednesday afternoon with the sterling share class TPOS up 3.4% or 65p at £20. Today the sterling shares dropped 4.7% to £19.35.
The company is also increasing the size of the tender offer to take place next month, saying investors can redeem around $136m (£100m). This is up from the $75m first proposed but is still less than a quarter of the company.
The price they can sell at will be set at 95.2% of the reference NAV instead of 87.5%, which shareholder AVI had bitterly attacked as far too low given the radical change in direction the company was outlining after concluding its strategic review.
However, analysts at Deutsche Numis pointed out the narrower discount on the exit relied on an $11m payments close to asset value whose timing was uncertain. “We are therefore sceptical regarding the implied discount figure of 4.8% that is referenced in the announcement.”
Saba Capital, the US activist that holds stakes in around 30 UK investment companies and has been pressing boards to improve shareholder returns, backed the plan when it was first announced.
In the statement, chair Rupert Dorey said the board was convinced of the merits of the Mailbu acquisition but had listened to investor feedback and engaged with a broad range of shareholders, including Marlton Partners, a Chicago-based investor in closed-end funds.
It hopes shareholders will support the acquisition and new direction at an extraordinary general meeting on 14 August. It will publish a circular to shareholders shortly. It is believed the vote requires 50% support to pass.
“The combination with Malibu will transform the company into a compelling UK-listed reinsurance platform with a robust new business pipeline, and the board is pleased to be bringing this opportunity to investors at such an attractive entry point,” Dorey said.
Before yesterday Third Point shares stood at discounts of around 20% and 21% for the dollar and sterling classes, having delivered returns of 74.3% and 64.7% to their holders over five years, below the 88.8% of its MSCI World index benchmark. By contrast, Pershing Square (PSH), Bill Ackman’s rival US equity hedge fund, has stormed ahead with a 134% total return.
The investment company acts as a gateway to the geared, multi-asset Third Point Master Fund which at 30 June had 74.5% net exposure to equities and 34.1% to credit with 5.4% in private holdings. Last month the portfolio returned 2.6% with a first half return of 2% underperforming the MSCI World’s 9.8% gain. Over half or 53.6% of its equity exposure was in the Americas, according to the company factsheet.
Commenting before news of the action group, QuotedData’s head of research, James Carthew, said: “My strong view is that, given the radical shift in direction, any shareholder who wants out should be able to exit their shareholding in full and at asset value. However, with 45% of shareholders onside with this new proposal, according to today’s announcement, this looks like it could be a done deal.”
