Third Point Investors (TPOU) has received further criticism for not allowing shareholders a bigger exit ahead of its controversial reverse takeover of Malibu Life after a $136m (£101m) redemption offer was over-subscribed by more than two times.
The Dan Loeb managed global hedge fund said over 9.5m shares were submitted for sale compared to the nearly 4.4m shares the company offered to buy back from investors who did not want to continue their investment ahead of a radical change in focus to the US fixed annuity market.
This means only 45.8% of redemption requests will be met. The shares fell 7% to $22 yesterday at the announcement.
Shareholders will receive an initial $28.56 per share with a further payment lifting the total to $32.64 when its unquoted assets are sold. The transaction was priced at a 4.8% below net asset value, an improvement on the original proposal of a 12.5% discount following shareholder pressure.
Led by Asset Value Investors, dissenting shareholders formed an investor group to fight for shareholders to be allowed to withdraw all their capital. They complained bitterly last month when the £408m company forced through the transaction using the 40% voting rights of VoteCo, a regulatory entity set up by the company with no economic interest in its assets. At the time QuotedData’s James Carthew said “we fundamentally disagree” with the company ramming through the vote against minority shareholders’ wishes.
The investor group said that none of the eight resolutions in the general meeting called to approve the deal would have attained their 50% or 75% approval hurdle without VoteCo support. For example, adjusted for the manager’s 25% stake, the first resolution achieved only 45.8% support from independent shareholders versus 54.2% against.
The investor group also failed in its challenge to a Takeover Panel decision that Loeb’s fund management company was not obliged to make a mandatory offer for the investment company despite the size of its stake and change in strategy.
In a ruling published yesterday, the chair of the panel’s hearing committee said the challenge had no reasonable prospect of success. “I accordingly reject the Investor Group’s request that the hearings committee be convened to consider this matter.”
Winterflood analyst Shavar Halberstadt said: “We suspect this deal will live in infamy, a cautionary tale across investment trust boardrooms and shareholder bases for years to come. Trapping shareholders in an incomparable vehicle in spite of clear shareholder opposition is far from best practice. The oversubscription of the redemption offer is a measurable indication of shareholder preferences, and we think it is quite clear that a larger exit opportunity should have been on offer.
“Incidentally, this story also illustrates a downside of the often-encouraged ‘skin in the game’, with the sizeable manager holding a determining factor,” he said in a note to investors.
Deutsche Numis, which was replaced as the company’s broker after criticising the terms, said: “We previously highlighted our concerns regarding the merger on governance grounds, given the unusual voting structure and large manager stake, as well as the lack of sufficient cash exit offered to shareholders, given the significant change in approach.”
