6 November 2012
PETALING JAYA: Closed-end fund iCapital.biz Bhd, managed by seasoned fund manager Tan Teng Boo, has become the target of opportunistic investors who may embark on a hostile takeover of the company, insiders close to the matter confirmed.
European hedge fund Laxey Partners has accumulated close to 10 million shares in iCapital.biz, representing just under a 6.9% stake. Laxey has a track record of targeting listed funds that trade below their net asset values (NAVs).
It is fairly common for institutional funds that have bought stocks of closed-end funds trading at a sharp discount to their NAVs to vote for their liquidation.
A request has been put forward to iCapital.biz to have one Andrew Pegge made a director of the company, along with two others Lo Kok Kee and Low Nyap Heng. Shareholders will vote on this at iCapital.biz's coming AGM this Saturday. As such, the AGM is being touted as a must attend for all shareholders who will no doubt be presented with arguments from both sides, namely the current management of iCapital.biz, headed by Tan and from parties associated with Laxey.
Pegge is the founder and a director of Laxey and has been embroiled in bitter shareholder disputes in the past. He has been described as a shareholder activist and manages funds that look to take advantage of “discount volatility” in investment trusts.
Together with Lo, they had embarked on a very similar move in Singapore last year, taking a position in SGX-listed closed-end fund United International Securities (UIS) and seeking board representation on the basis of championing a narrowing of the gap between the market price of UIS with that of its NAV. Laxey and Lo have also embarked on similar efforts in Malaysia in the past with Amanah Millenia Fund and Amanah Harta Tanah PNB2, respectively.
Another substantial shareholder has also emerged in iCapital.biz, in the form of London Investment Management Co Ltd, with a 6.5% stake. It isn't clear if this fund is in cohort with Laxey but they are both the largest shareholders in iCapital.biz, collectively owning at least 18.7 million shares (or 13.4%) out of the total 140 million iCapital.biz shares.
Although far from having a simple majority of iCapital.biz shares, this combined stake does wield some power considering that the remaining shareholders of iCapital.biz seem to be spread out.
According to iCapital.biz 2012 annual report, it has more than 3,000 shareholders. But about 65.8% of its shares are held by about 2,000 minorities who hold between 100-10,000 shares. Tan's Capital Dynamic Assets Management Sdn Bhd, which manages the closed end fund, has only 689,000 shares or a 0.49% stake.
Sources close to iCapital.biz said that Tan was very concerned about the moves to have new members on board and will consider stepping down if shareholders were to give in to the request.
In what is seen as a defensive mode, iCapital.biz has put up two individuals to be elected to the board, namely Datuk Tan Ang Meng, the former CEO of Fraser & Neave Holdings Bhd and Dr Yin Thing Pee, a medical specialist.
iCapital.biz shares have seen some active trading this week and hit a 52-week intra-day high of RM2.56 yesterday and then closing at RM2.49, up almost 9% from early last week.
iCapital.biz has had a decent performance since its listing in October 2005, with its NAV rising from 99 sen then to RM2.95 as at Oct 24. The performance of its share price has also outpaced the FBM KLCI. However, its stock has traded below its NAV, a gap which earlier this month stood at about 30%. The gap has since narrowed to around 19%.
iCapital.biz's ethos is to allow long-term shareholders to benefit from value investing and is helmed by the respected Tan, who is a sought-after commentator of economic and corporate affairs. Laxey though is likely to put forward a simple and pragmatic suggestion to iCapital.biz shareholders: liquidate your company and cash in at its NAV (or close to it).
[Source]
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