WAM Capital (ASX:WAM) share price hits new high on proposed takeover bid

A new merger might be on the cards…

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The WAM Capital Limited (ASX: WAM) share price is having a happy day indeed today so far. WAM shares are trading up 0.42% to $2.37 apiece. That’s a new 52-week high for WAM Capital, one of the ASX’s largest Listed Investment Companies (LICs).

So what’s pushed WAM Capital up to this new high watermark?

Well, there has been some news out this morning that may be contributing to the optimism today.
WAM Capital announced that it is intending to place a bid to acquire its fellow LIC PM Capital Asian Opportunities Fund (ASX: PAF). WAM has put up an offer of 1 WAM share for every 1.99 PAF shares owned.

This offer ups the ante for shareholders in the Asian Opportunities Fund, who have already received a takeover bid from another interested party.

Earlier this month, the Asian Opportunities Fund announced it had entered into a scheme of arrangement with the PM Capital Global Opportunities Fund (ASX: PGF). The Global Opportunities Fund is a far larger LIC from the same family.

This offer constituted an offer representing the value of “PAF’s after-tax net tangible assets (before deferred tax assets) per share divided by PGF’s after-tax net tangible assets (before deferred tax assets) per share”.

WAM Capital to add another LIC to the stable?

However, according to WAM, its new offer represents a “premium to the implied value of PAF shareholders under the [alternative] Scheme”

If the Asian Opportunities Fund ditches a “break fee” that was included in the previous scheme, WAM has offered an increased bid of 1 WAM share for every 1.975 PAF shares owned.

Here’s some of what WAM chairman Geoff Wilson said on the offer this morning:

WAM Capitals’ Offer is clearly superior to the proposed Scheme and we look forward to PAF’s Board Committee recommending our offer to all PAF shareholders.

It is our view that the PAF board of directors have not explored all avenues to extract maximum value for PAF shareholders. The Break Fee payable by PAF shareholders, in the event the proposed Scheme does not proceed, is illogical and uncommercial…

The PM Capital Asian Opportunities Fund share price has reacted very positively today so far as well. PAF shares are currently up 5.26% to $1.10 a share.

The Asian Opportunities Fund is an LIC that primarily looks, unsurprisingly, at companies listed in Asia. It typically invests in a “concentrated portfolio of 15-35 within Asia ex-Japan”. Some of its most recent disclosed holdings include iCar Asia, Sinopec Kantons and China Mobile.

At WAM Capital’s current share price, this LIC has a market capitalisation of $2.08 billion with a dividend yield of 6.54%.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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