WAM Leaders has proposed to acquire all of Century Australia’s shares on a pre-tax net tangible assets (NTA) basis through a scheme of arrangement.
Geoff Wilson, the Chairman of WAM Leaders, said “We look forward to finalising the integration of Century Australia with WAM Leaders, which commenced with Wilson Asset Management’s appointment as Century Australia’s investment manager”.
Why do this?
The merger will create a number of benefits according to WAM.
An increase of net assets to $885 million with more than 18,000 shareholders should increase on-market liquidity. This could also hopefully minimise the chance of it trading at a discount to NTA due to illiquidity.
It will deliver a reduced management expense ratio of at least 0.25% per annum after removing duplicate expenses, as well as a larger base to spread the costs across.
If Century Australia shareholders approve the scheme at a meeting in late January 2019 then the merger would be completed by February 2019.
It’s likely to go ahead considering Century’s independent directors believe it’s in the best interests of shareholders.
Should you invest?
Whilst the Century Australia share price rise of 1.6% today has probably accounted for the news, I think this makes WAM Leaders a more attractive LIC.
WAM Leaders has proven it can materially beat the ASX index on gross-return basis. If the annual management fee is reduced by 0.25% then that leaves more net returns for investors – a very useful improvement for shareholders.
With a grossed-up dividend yield of 6.4% I think WAM Leaders looks like an attractive way to get exposure to larger ASX shares.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.