WAM Leaders Ltd (ASX: WLE) has decided to launch a takeover bid for the LIC QV Equities Ltd (ASX: QVE).
WAM to continue its acquisitive streak
The Wilson Asset Management (WAM) listed investment companies (LICs) have acquired a few other LICs in recent years, particularly WAM Capital Limited (ASX: WAM).
WAM Leaders has announced it intends to make an off-market takeover bid for QV Equities. The offer is 1 WAM Leaders share for every QV Equities 1.4675 shares.
Based on the WAM Leaders share price on 30 January 2024, the offer represents $0.95 per share of implied value for QV Equities shareholders, adjusted to include payment of the QV 1.3 cents per share dividend announced yesterday.
This offer represents a premium of 5% to QV Equities’ share price on 30 January 2024.
There are a few conditions including 50.1% minimum acceptance, no change to the investment management agreement, no material transactions, no material adverse change, no share market fall of at least 5% and so on.
The LIC also said it has separately proposed to the QV Equities board of directors the possibility of entering into an agreement to buy 100% of QV Equities shares through a scheme of arrangement.
What are the benefits of this deal?
WAM Leaders tried to sell the deal to QV Equities shareholders by saying there is a “stable and clearly articulated investment strategy” with long-term investment portfolio outperformance. WAM Leaders’ investment portfolio has outperformed the S&P/ASX 200 Accumulation Index (ASX: XAOA) by 4.4% per year.
There is a higher dividend yield, with a history of growing dividends and a larger profit reserve.
It also suggested there could be a reduced management expense ratio as a result of the removal of duplication of expenses.
For WAM Leaders shareholders, it is expected that the LIC’s net assets will increase by approximately $229 million, and it would benefit from buying QVE shares at a discount to their current underlying pre-tax NTA.
Final thoughts
WAM Leaders is a strong-performing LIC and added scale would come with some benefits, though being larger can make strong investment returns a little trickier because it makes it harder to buy and sell shares at a great price, or invest in smaller businesses in a meaningful way.
I think it’s one of the more attractive ASX dividend shares though.
