Listed investment company (LIC) WAM Global Limited (ASX: WGB) has revealed a big potential merger with fellow globally-focused LIC Templeton Global Growth Fund Ltd (ASX: TGG).
What is the proposal?
It has been announced that the two global LICs have agreed a takeover deal.
The proposal is that the LIC will buy all of the Templeton Global Growth shares that it doesn’t already own.
There are two options that Templeton Global Growth can choose between.
A cash consideration has been arranged where Templeton Global Growth has agreed to offer to buy-back Templeton Global Growth shares based on the net tangible assets (NTA) per share after all current and deferred taxes and associated transaction costs of Templeton Global Growth to do this.
But there is also a scrip/shares takeover alternative.
The question is – what will Templeton Global Growth shareholders get? The number of new WAM Global shares to be issued will be calculated by reference to the relative NTA per share after tax, but before deferred taxes of WAM Global and Templeton Global Growth, which will be calculated in the same way as the monthly NTA announcements. The Templeton Global Growth NTA will be adjusted for the impact of the buy-back.
Templeton shareholders will also get a WAM Global option for every new share they receive. The option will give people the opportunity to buy WAM Global shares at $2.54 per option.
Management comments
WAM Global Chair Geoff Wilson said: “The WAM Global Board of Directors believe that the scheme will be beneficial to both companies and result in a superior merged entity leveraging Wilson Asset Management’s proven investment strategy.”
Templeton’s board believe the proposal is in the best interests of shareholders, as long as the independent expert makes the same conclusion and that there isn’t a better offer.
Summary thoughts
This seems like it may be a good outcome Templeton shareholders, but it would be interesting to know how much financial benefit WAM Global shareholders will get from being a larger LIC.
It’s a good idea to buy good LICs at a discount, so it could be a good idea to keep an eye on when (or if) WAM Global trades at a discount to its NTA.
