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Geoff Wilson's WAM Capital's (ASX: WAM) off-market takeover bid of rival firm Concentrated Leaders Fund (ASX: CLF) has been shunned by the target's board today following a review of the offer.
CLF, an investment manager focusing primarily on ASX 200 listed entities, claims WAM's bid is opportunistic and significantly undervalues the company.
WAM launched its takeover bid earlier in September, with its deal valued at around $68.7 million at the current share price.
The CLF board, chaired by Brian Sherman (pictured) who has been with the company since its inception in 1987, unanimously recommended shareholders reject WAM's "undervalued" and unsolicited offer today.
According to a letter sent to CLF shareholders, the bid would result in a 16.22 cents per share loss of pre-tax NTA value for those who accept it.
"The IBC (Independent Board Committee) does not consider the market prices to be representative of the underlying value of either CLF or WAM Capital," says the CLF board.
Further, CLF claims accepting shareholders would see the benefits of franking credit diluted and that they would lose their regular CLF quarterly distributions.
CLF also points out that if WAM is successful with its bid the new owner would expose shareholders to WAM's investment strategy that focuses on small-to-medium sized ASX listed companies.
In comparison, CLF claims its current strategy of focusing on the largest 200 companies in Australia remains a successful approach.
"If CLF shareholders want this significantly different risk profile, they can choose to separately invest in WAM Capital or other fund managers offering this type of exposure to a very different segment of the market," says CLF.
Finally, while WAM is currently trading significantly higher than its $1.74 pre-tax NTA per share, CLF says there is no guarantee that this will continue.
"These issues and the potential volatility of the share price premium or discount to pre-tax NTA of LICs is one of the key reasons the IBC believes it is better to focus on pre-tax NTA as the appropriate measure of value," says CLF.
"However, if you were to take WAM Capital's suggestion of focusing on LIC share price premium/discount to pre-tax NTA, an acceptance of the Offer would mean that CLF shareholders would be exchanging an undervalued asset relative to pre-tax NTA (CLF shares) for an overvalued asset relative to pre-tax NTA (WAM Capital shares)."
Wilson claims CLF is mismanaged
WAM hopes to attract CLF shareholders into the bid with claims its target is poorly run and mismanages capital.
Specifically, WAM highlights how the appointment of a new CLF fund manager occurred without shareholder approval.
WAM says this is evidence that CLF treats its shareholders unfairly in bypassing their vote on the significant matter of a new manager, representing poor corporate governance for a listed company.
WAM's bid for CLF is its latest move to consolidate the market and comes soon after the group was appointed as the investment manager of Blue Sky Alternatives Access Fund (ASX: BAF).
BAF and its shareholders hope the appointment of WAM will bring a new lease of life to the fund under the new name WAM Alternative Assets.
The appointment saw BAF do away with its old investment manager, the similarly named Blue Sky Alternative Investments (ASX: BLA) which entered receivership in May last year.
As a result, WAM chairman and investment officer Geoff Wilson and WAM lead portfolio manager Adrian Siew were appointed as directors at BAF.
Shares in WAM are up 0.47 per cent to $2.16 per share at 11.08am AEST.
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