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Activist Shareholder Activity Within Macquarie International Infrastructure Fund

11.30.2012 · Posted in Dividend Stocks, Malaysia

I just found out the interesting news that there is activist shareholder activity within Macquarie International Infrastructure Fund (MIIF). Although I am not vested, these activities do interest me as they me remind of the days when I was in M&A IB advising on defenses against hostile takeovers.

 

Basically, what has happened is that the activist shareholders have requested to increase the maximum number of directors from 5 to 9 and also appoint 3 of their own directors. This is a major change from the current setup as this gives these shareholders significant say in the board meetings. The board is very powerful as they can take many actions as listed in the bylaws without requiring shareholder voting.

 

The Activist Shareholders

As a shareholder, you have to understand the objectives of the activist shareholders and who they are. I just checked the activist shareholder is Raffles Nominees Pte Ltd, which holds the stocks for LIM Asia Multi Strategy, Metage Funds and GSS Offshore. They own 10.26% of the company.

 

What are their objectives? 

They want to elect 3 of their own directors to the board. It is important to understand what their objectives are.

1. It could be that they want to secure more seats before launching a tender offer in a hostile takeover. This is a typical tactic used by corporate raiders.

2. It could be they want to divest assets to realize greater value as MIIF is currently suffering from a conglomerate discount due to too many unrelated assets.

3. It could also be that they want to have more say in how the company is run as they feel that the current board is not performing its duty sufficiently.

The credentials of the directors are really irrelevant at this point, it is more important to know what they aim to achieve by being on the board. At this point though, point 2 could be a very likely objective.

 

LIM Asia Multi Strategy

LIM Asia Multi Strategy is actually a hedge fund founded by George Long. It is multi strategy, so it does not have a specific strategy it employs so it is more difficult to be able to determine what their objectives are. According to him, “Special situations can be a fairly broad category, including private debt, private placed stock, it can be private convertibles, it can be corporates coming out of restructuring … there’s a whole series of what it possibly means.”

Just FYI, LIM Asia was involved in the winding up of Tau Investor in Aug this year, a UK fund that invests in companies in Kazakhstan.  All investments will be sold and proceeds returned to shareholders. The struggle for these funds in Kazakhstan were the disparity between net asset value and share price. For MIIF, the last reported NAV was $0.70 and current stock price is about $0.59.

 

What Should You Do If You Are a Shareholder

Firstly, determine if you would mind being forced to sell the stocks at close to current market price. If you bought MIIF at a time when the prices were higher and thought that it was undervalued, then you might want to vote against this due to the possibility of a hostile takeover. If you don’t mind selling anyway, taking action is up to you.

Second, are you satisfied with the current board and management’s performance so far? If you are, you may vote against it to keep it status quo.

Thirdly, if you think the assets are undervalued and can only be unlocked through structured divestment of assets, these shareholders may make it happen.

 

I have never been really interested in MIIF due to too many unrelated assets, however I may follow this just to see how it plays out.

 

For more information, you may be interested in:

Muddy Waters Initiates Coverage on Olam with Strong Sell

Olam plunges in price after famous shortist Carson Block questions their accounts

 

2 Responses to “Activist Shareholder Activity Within Macquarie International Infrastructure Fund”

  1. Hi Calvin,
    In a takeover, would MIIF shareholders be paid the NAV price (understand latest NAV @Sep2012 is 0.72) or the current market price? Thanks.

    • Hi jojo, in general for most takeovers the price offered would be a premium to the weighted average trading price for the past 7 days, 14 days or 1 month depending on how they choose to position it. The offer price is generally not related to the NAV of the stock.

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