WAM Capital share price edges higher on takeover bid

The WAM Capital share price is today edging higher after the listed investment company announced a takeover bid for Concentrated Leaders Fund.

Daniel Ewing

Born in Edinburgh, Scotland, Daniel moved to the Gold Coast, Australia at age 11. Nine years later he is in his third year of University at Monash in Melbourne. While starting out in a Science Degree, Daniel realised it wasn’t for him and promptly transferred to Commerce where he has developed a passion for the stock market. When not studying, Daniel can be most often found at the beach thanks to a passion for surfing.

Published September 4, 2020 1:52 pm AEST

The WAM Capital Limited (ASX: WAM) share price is today rising after announcing it has placed a bid for Concentrated Leaders Fund Ltd (ASX: CLF). The WAM Capital share price has risen 0.48% on the news despite it being a tough day for the All Ordinaries Index (ASX: XAO).

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About WAM Capital

WAM Capital is a listed investment company (LIC) managed by Wilson Asset Management. It listed on the ASX in 1999 and provides investors with exposure to an actively managed, diversified portfolio of undervalued companies listed on the ASX. WAM Capital aims to deliver a stream of fully franked dividends and provide capital growth with its focus on small to medium sized businesses.

What's moving the WAM Capital share price?

WAM Capital announced a conditional off-market takeover bid for Concentrated Leaders Fund (CLF). The offer consideration is two WAM Capital shares for every 3.7 CLF shares, representing a 15.2% premium to the CLF share price.

WAM Capital has sited the takeover as an "exit opportunity" for Concentrated Leaders shareholders. WAM Capital's board have cited the appointment of the new CLF manager occurring without shareholder approval as reason to accept the offer. Furthermore, the LIC believes that CLF shareholders have been unfairly treated as the size of the company was reduced through a 12.8% special dividend payment.

Concentrated Leaders' response

Concentrated Leaders' management team is currently reviewing the offer and has stated that it is not in a position to make a recommendation to shareholders yet.

Accordingly, CLF shareholders have been advised to take no action in relation to the offer until the board has had a chance to further consider the offer and bidder's statement.

Concentrated Leaders is also a listed investment company. It invests primarily in Australian companies within the S&P/ASX 200 Index (ASX: XJO) with the objective of delivering regular income and long-term capital growth to its shareholders.

Foolish takeaway

It remains to be seen what the response will be from Concentrated Leaders' management. Nonetheless, the market has responded positively with the Concentrated Leaders share price moving 4.9% higher to $1.07. According to reporting in The Australian Financial Review, the move represents the potential beginning of a round of consolidation in the sector.

Including today's modest rise, the WAM Capital share price is currently trading 7.93% lower in 2020.

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