Shares in Australian listed investment company WAM Capital Limited (ASX: WAM) are inching higher today and now trade less than 1% higher at $2.23 apiece.
Investors are responding positively to an announcement out of WAM's corner that a long-drawn and highly competitive acquisition has passed through to the final stages of approval today.
What's the situation?
The Directors of PM Capital Asian Opportunities Fund Limited (PAF) now recommend that PAF shareholders should accept WAM Capital's takeover bid before it expires, in the absence of a superior proposal.
For reference, WAM's takeover bid is due to close on 14 January 2022, unless it is otherwise extended.
It was previously announced on 13 December, that a scheme for WAM Capital to acquire all of the shares in the PAF was not passed by PAF shareholders at the scheme's meeting.
In addition, on 17 December 2021, PM Capital's Global Opportunities Fund Limited (PGF) announced its decision not to pursue an alternative approach to acquiring shares in PAF at this time, and that it may never pursue an alternative approach.
PAF Shareholders accepting the WAM takeover offer will receive 1 WAM Share for every 1.99 PAF shares. As of 21 December 2021, the closing price of WAM shares was $2.215, implying an offer value of $1.113 per PAF share.
The takeover offer price of $2.22 represents a premium of 6.8% to PAF's net tax assets (NTA) per share of $1.0450 as at Friday 17 December 2021.
Independent valuation of PAF's business components shows it has a NTA of $57.5 million on the low end and $62.4 million on the high end. This values PAF's share price at $1 to $1.09 according to that analysis from Lonergan Edwards & Associates Limited.
In comparison, WAM was valued at having $181.90 in NTA after tax (excluding deferred tax assets) in the same opinion.
It is also a 15% premium to PAF's closing price of $0.97 on 14 September 2021, being the day before the announcement of the PGF Scheme.
What's the outcome?
Even though the takeover bid surpasses the valuation range for PAF's shares on a 100% controlling interest, it will still result in a NTA per share dilution for those shareholders receiving WAM shares as consideration.
WAM will issue new shares no later than 4 days to eligible shareholders after the processing of valid acceptance.
The release acknowledges that the contest for the acquisition of PAF shares between WAM Capital and PGF has been the subject of considerable market attention in 2021.
As such, PAF reckons that if another party were to emerge with a competing proposal, it would have likely done so by now. This, combined with PAF Directors requesting that WAM improve its offers on numerous occasions, but to no avail, means that PAF "considers the prospect of a superior proposal emerging for your PAF Shares is now unlikely".
One other factor is that PAF shareholders who accept the WAM Capital offer will not receive the WAM Capital FY21 final dividend.
Nevertheless, the independent auditor's opinion concluded that the WAM Capital offer provides PAF shareholders with improved share market liquidity, as the value of WAM Capital shares traded on the ASX materially exceeds that of PAF.
This is in combination with PAF's board recommending its shareholders to unanimously vote in favour of the takeover, given the reasons stated above. Shareholders have until mid-January 2022 to do so.
