'Takeover bid for Capital inevitable'

Press, 26 April 1988, Page 43

'Takeover bid for Capital inevitable'

I. < I A takeover bid for Capital Investment Trust was inevitable, said Mr Peter Baynes, Managing Directdr ofjTower Triist, which recently launched a successful takeover) bid for New Zealand's Only stock exchange listed unit trust. When the shares of listed ■ companies trade at below their asset backing there is always the possibility that ■ another party will endeavour to acquire tie company’s assets by makirig an offer for the company’s shares which! is abovej the ) market value, but below the realisable value of its assets. In the case of a listed trust. | which |itself invests cnly in the sharemarkets, that market mechanism is likely! to come; into play more; quickly than in the dase of a listed company. The reason is that the

assets of a. listed sharemarket unit trust such as Capital Investment Trust are easily valued and immediately realisable, unlike the. assets of many companies. “Prior to our takeover offer, the unitholders in Capital Investment Trust were ; in a doubly disad,'vantaged situation. “First, like all share- | market investors, the livalue of the assets held by their trust had)been rej.duced /by the decline in i the world's sharemarkets ! after October ) 19. That Y decline had reduced the underlying value of shares | in the trust to around 67c I. by late pebruary. “Secondly, ! negative sentiment in the New Zealand Market was causing Capital Investment Trust shares o trade at only ' around 40c (around 40

per cent Jess than their value). “In other words a company shard valued at $2 in the market was valued at only 51.201 “Clearly' this was a i situation that could not continue. If we had not I made our offer, it is ini evitable that another party would have made a hostile bid to acquire i Capital Investment Trust's ' assets for their private portfolio.”! Mr Baynes I said. ; Tower , Trust's offer. ! which ha? been accepted by some 190 per cent of Capital Investment Trust unitholders, was for an exchange iof units with the Tower Global Fund. The of’er was pitched at about 13c less than the full asset value of Capital j Investment Trust units .— !

a relatively small price for (Capital Investment Trust unitholders to . pay for the benefits of switching into a lower-risk fund in which the units are always realisable at, their full asset value. As well, there is access to the other trusts through’ free switching. “The; timing of this takeover coincided : with our | restructuring Tower Globiai Fund into a mixed offstiore investment which now) invests partly i'n the world’s; but also in the world's) bond and currency markets. 'To my knowledge it is the only offshore investment fund of its) kind available in New Zealand and 'now comprises nearly $5O | million managed on' behalf of over SOii'd . investors.” Mr Bay neg said