WAM Leaders, a listed investment company managed by Wilson Asset Management, has announced its intention to make an off-market takeover bid for QV Equities (QVE), subject to certain conditions.
In an ASX statement on Wednesday, WAM Leaders said it had approached QVE in relation to the possibility of entering into an agreement to acquire 100 per cent of its shares by way of a scheme of arrangement.
If such an agreement is not reached, the firm clarified that its present intention is to proceed with the offer, which is one WAM Leaders share for every 1.4675 QVE shares.
Based on WAM Leaders’ share price on 30 January 2024, the offer represents $0.95 per share of implied value for QVE shareholders, adjusted to include payment of the QVE 1.3 cents per share December 2023 fully franked quarterly dividend as announced to the ASX on 30 January 2024 share price.
The implied value represents a premium of 5.0 per cent to QVE’s share price as at the same date, a premium of 6.3 per cent to QVE’s one-month volume-weighted average price (VWAP), and a premium of 8.9 per cent to QVE’s three-month VWAP.
Moreover, entities associated with WAM Leaders have a relevant interest in 15.8 per cent of QVE shares on issue.
While not confirming a specific date, WAM Leaders said that a bidder’s statement will be prepared and distributed to QVE’s shareholders in accordance with the requirements of the Corporations Act.
In explaining the decisions behind the offer consideration, WAM Leaders said that QVE’s investment portfolio has underperformed since listing in 2014.
“The QVE board of directors has been unable to return value to shareholders and has not succeeded in implementing effective capital management initiatives to manage the persistent share price discount to NTA (net tangible assets),” the firm wrote on Wednesday.
“If this offer is successful, it will provide QVE shareholders with the opportunity to be invested in one of the largest listed investment companies on the ASX.”
Among the benefits of a QVE shareholder becoming a WAM Leaders shareholder, the letter said it offered a “stable and clearly articulated” investment strategy; access to a higher annual fully franked dividend yield; access to WAM’s capabilities and WAM Leaders’ larger market capitalisation and on-market liquidity; and a reduced management expense ratio.
Meanwhile, it said that WAM shareholders would also benefit with access to greater on-market liquidity through a larger market capitalisation of almost $2.0 billion (based on the WAM Leaders share price on 30 January 2024) with approximately 30,000 shareholders.
Moreover, it will also increase WAM Leaders’ relevance in the market by improving broker and research coverage, increasing interest from financial planners and gaining additional access to market opportunities.
QVE rejects non-binding proposal
In an ASX announcement on Wednesday, QV Equities acknowledged WAM Leaders’ intention to make an off-market takeover bid, noting that its board would consider and evaluate the proposed takeover.
QVE also confirmed that it received a confidential, incomplete, conditional non-binding merger proposal from WAM Leaders to merge QVE and WAM Leaders by way of an all-scrip transaction pursuant to which QVE shareholders would exchange their QVE shares for shares in WAM Leaders, through a scheme of arrangement.
“QVE confirms that in light of the confidential discussions with WAM Leaders, the non-binding proposal, in the form it was presented to QVE, was rejected,” it said in the announcement, adding that it was not in the best interests of shareholders.
It, however, added that in light of the proposal, it has commenced a formal evaluation of strategic options for QVE, with a view to maximising value for all QVE shareholders.
“The review is being progressed by the board committee and is consistent with QVE’s regular evaluation of opportunities to create value for shareholders.”