The WAM Capital Limited (ASX: WAM) share price is today rising after announcing it has placed a bid for Concentrated Leaders Fund Ltd (ASX: CLF). The WAM Capital share price has risen 0.48% on the news despite it being a tough day for the All Ordinaries Index (ASX: XAO).
About WAM Capital
WAM Capital is a listed investment company (LIC) managed by Wilson Asset Management. It listed on the ASX in 1999 and provides investors with exposure to an actively managed, diversified portfolio of undervalued companies listed on the ASX. WAM Capital aims to deliver a stream of fully franked dividends and provide capital growth with its focus on small to medium sized businesses.
What’s moving the WAM Capital share price?
WAM Capital announced a conditional off-market takeover bid for Concentrated Leaders Fund (CLF). The offer consideration is two WAM Capital shares for every 3.7 CLF shares, representing a 15.2% premium to the CLF share price.
WAM Capital has sited the takeover as an “exit opportunity” for Concentrated Leaders shareholders. WAM Capital’s board have cited the appointment of the new CLF manager occurring without shareholder approval as reason to accept the offer. Furthermore, the LIC believes that CLF shareholders have been unfairly treated as the size of the company was reduced through a 12.8% special dividend payment.
Concentrated Leaders’ response
Concentrated Leaders’ management team is currently reviewing the offer and has stated that it is not in a position to make a recommendation to shareholders yet.
Accordingly, CLF shareholders have been advised to take no action in relation to the offer until the board has had a chance to further consider the offer and bidder’s statement.
Concentrated Leaders is also a listed investment company. It invests primarily in Australian companies within the S&P/ASX 200 Index (ASX: XJO) with the objective of delivering regular income and long-term capital growth to its shareholders.
Foolish takeaway
It remains to be seen what the response will be from Concentrated Leaders’ management. Nonetheless, the market has responded positively with the Concentrated Leaders share price moving 4.9% higher to $1.07. According to reporting in The Australian Financial Review, the move represents the potential beginning of a round of consolidation in the sector.
Including today’s modest rise, the WAM Capital share price is currently trading 7.93% lower in 2020.
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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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