A furious row has broken out between Aquila European Renewables (AERI) and Aquila Capital with the investment company’s board accusing its fund manager of welching on a proposed sale of around half its portfolio.
The £70m listed fund, whose 20-month wind-down is being overseen by activist and chair Robert Naylor, said it was examining “all available remedies” after Aquila, a subsidiary of Germany’s Commerzbank, withdrew its offer at a late stage in the transaction when AERI was drawing up a sale and purchase agreement for signature.
According to AERI, which has sold assets to its fund manager on two previous occasions, Aquila Capital “sought to alter the proposed transaction by increasing the assets under offer to approximately two-thirds of the portfolio, while reducing the total consideration and thereby applying a materially wider discount to the net asset value of the portfolio”.
“In the board’s view, Aquila Capital has sought to take advantage of the company’s advanced position in the process and the significant time and costs already incurred, by proposing significantly inferior terms. This is especially concerning given the due diligence process was nearly completed and Aquila Capital had not raised any material issue which would justify this course of action. Moreover Aquila Capital, as investment adviser, has very extensive knowledge of the assets,” the company said.
Naylor, fund manager of activist Achilles Investment Company (AIC), said the board was “deeply troubled” by Aquila Capital’s conduct particularly as it had recommended AERI reject an independent offer for its Greco solar portfolio in southern Spain which valued the asset at a narrower discount to net asset value (NAV) than Aquila now did.
“The board will examine all available remedies and consider whatever action is necessary to protect shareholders’ interests,” said Naylor, who saw restructuring specialist Brett Miller resign from Achilles last week.
AERI shares slid over 8% in early trading to a new low of 18 euro cents. They have fallen 85% in the past five years and stood at a 58% discount to net asset value yesterday. Annual results last month showed the value of the unsold portfolio was written down by 35% last year.
Our view
James Carthew, head of investment company research at QuotedData, said: “The picture that the Aquila European Renewables board paints is concerning. The value of the portfolio has already been written down aggressively, the discount has hit new depths this morning, and now it sounds to me as though the board is considering firing its adviser and potentially even launching legal action against it. I said on 28 April that I would be wary of chasing the discount opportunity on these shares and I still stand by that.”
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