Lindsell Train (LTI) believes its shareholders have demonstrated “continued confidence” in the investment trust after a 20% tender offer was over-subscribed with 32.5% of shares put up for sale.
Nearly 6.5m shares were validly tendered in the offer announced last month and approved by shareholders last Thursday, giving them the chance to sell shares at 95% of net asset value (NAV) compared to their current 11% discount to NAV.
That’s more than the maximum number of 4m shares that the company said could be sold in the tender offer but is less than might have been feared.
Although the amount of shares to be sold does not change, the scale of demand is significant in terms of measuring support for the £116m company. Lindsell Train has outperformed the UK stock market since launch in 2001 but badly underperformed in the past five years with the portfolio challenged by a sell-off of its data and software stocks over fears of disruption by artificial intelligence, which it believes the market is mispricing.
Chair Roger Lambert claimed the company had the support of more than two-thirds of shareholders. However, excluding the 13.9% stake held by fund managers Nick Train and Michael Lindsell, who did not tender their shares, the proportion trying to sell was close to 38%.
Following a scale-back exercise, shareholders who tendered more than their basic entitlement will also get around 20.9% of their excess application, the company said.
The shares will be sold at 637.291p with payments to shareholders expected on 20 October. That’s above the 572p the shares were trading at this morning.
Based on the 20m shares currently in issue and their NAV of 669.5p, Lindsell Train has net assets of £134m. This will fall by around £26.8m to £107m after the 20% share sale. This means the trust’s market capitalisation could fall below £100m if the tender offer does not narrow the discount, although the company will hope that its rating will improve after the shareholder exit.
“We believe this outcome strikes the right balance between providing liquidity for those seeking an exit and protecting the interests of shareholders who wish to remain invested,” Lambert said.
The trust will also sell 1,239 of the 6,195 shares it owns in the managers’ fund management company Lindsell Train Limited (LTL) back to the company. This is to ensure that the proportion of the trust’s assets invested in LTL remains at the 16.6% level it stood at on 4 September before the tender was announced.
Our view
Richard Williams, senior analyst at QuotedData, said: “While take up for LTI’s tender offer has been strong, the portfolio is liquid and so this outcome is readily manageable. With the tender now concluded, LTI should end up with a clean register of shareholders that understand its proposition and attention can now return to the underlying portfolio and improving returns for them. If successful, LTI could be in a position to start growing again.”
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