JEN HILL, JAMIE COLVIN, Citywire Investment Trust Insider, 30 June 2023:
Large shareholders have pushed through the knockdown sale of real estate investment trust Civitas Social Housing (CSH) to a Hong Kong asset management group, which effectively robs investors of up to £175m of value.
In May, the board agreed and recommended an 80p-per-share offer from CKA Group, a direct investor in Civitas Investment Management, after it swooped in with a £485m cash bid.
In annual results published yesterday, CSH revealed the offer had become unconditional on 23 June after the proposed purchaser either held or had received valid acceptances in respect of around 64% of the issued share capital of the fund a day earlier.
James Carthew, head of investment company research at QuotedData and a shareholder in the CSH, said it was an ‘extremely disappointing’ development.
‘Effectively, they [the large shareholders] handed the bidder up to £175m of value, assuming it can buy the remainder at the same price, without putting up a fight. I’m not sure how they can justify that to their underlying customers,’ he said.
Minorities holding 25% of the register can block a delisting or a liquidation of a company, while holders of 10% can block the majority shareholder from forcing them to sell their shares. However, Carthew conceded that ‘in this case, I see little point in persevering with Civitas and have since accepted the offer’.
Manager Pietro Nicholls agrees that the offer ‘undervalues the company a little too much’. At the time of the bid, he had 3% exposure to Civitas in his £211m VT RM Alternative Income fund, but he told Citywire he has since exited the position.
Shares in CSH soared 43% on news of the offer and have since bumped along around the offer price of 80p, but that nevertheless undervalues the assets by 26.7%.
‘Now that one unloved investment company has been bought out at a 27% discount, how many others might follow?’ asked Carthew, a columnist for this website.
‘Triple Point Social Housing [SOHO], which is a very similar fund, still trades on a 61% discount and offers a yield of 11%. It seems like an obvious place to reinvest some or all of my money.’
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