Bellevue Healthcare (BBH) will hold a general meeting on 4 March for shareholders to approve the investment policy of its proposed new fund manager, Columbia Threadneedle, but the deal could fall apart if the investment trust shrinks too much in a 100% tender offer.
In an example of good corporate governance, BBH is offering shareholders a full exit at 2% discount to net asset value if they do not wish to remain invested in the investment trust under Columbia Threadneedle’s star healthcare fund manager Kosta Kleyman.
However, if at any point net assets fall from their current £105m to under £55m, Columbia Threadneedle will be free to give three months’ notice to resign.
To reduce the risk of this happening, the group has promised to invest $25m (£18m) to bulk out the fund and expects net assets of at least £72m following the tender.
In 2021, five years after launch, BBH peaked at around £1bn but a combination of investment losses of 11% in the past five years and continuous buybacks under a zero discount policy have left the company at a fraction of its former size.
Chair Kate Bolsover wants shareholders to approve Kleyman’s “long” and “short” hedge fund management approach to healthcare stocks, the re-sale of tendered shares to new investors and future buybacks.
The proposed switch to Columbia Threadneedle from Bellevue Asset Management will not take place unless all of the resolutions are passed at the meeting. If any of those fail or if the minimum size condition is not met, she said “the board will promptly put forward alternative proposals for the future of the company, which may include proposals for the winding-up of the company.”
Share buybacks will be suspended between now and the meeting. As previously announced, if the appointment of Columbia Threadneedle proceeds, the zero discount policy will be replaced by quarterly exits at which shareholders can sell up to 15% of their shares. The company will also be renamed CT Healthcare Trust.
Our view
James Carthew, head of investment company research at QuotedData, said: “As this has been well flagged and the zero-discount mechanism has continued to operate, it seems reasonable that the remaining shareholders (only just over £100m worth now) will be in favour of the appointment of Columbia Threadneedle. The injection of cash will bulk it up a little but I am curious to see what the appetite will be to further expand the trust once CT is in charge.”
