RAC bidding for Astoria

RECM and Calibre (RAC) has made a play for majority control of offshore investment fund Astoria, via its wholly owned subsidiary, Livingstone Investments.

RAC offered R13.50 per share, a 9.8% premium on the current share price of R12.29, but less than Astoria’s current NAV of $1.20 (R15), for the Astoria shares it doesn’t already hold. RAC already owns 28.72% of Astoria. The balance of Astoria shares, not held by Livingstone, are owned by about 4 000 shareholders. Of these, 28% are clients of Anchor Capital, the investment firm that manages Astoria’s investment portfolio. PSG and 36ONE manage smaller stakes on behalf of clients.

If RAC succeeds in acquiring 50%-plus of Astoria shares, it will presumably remove Anchor Capital as Astoria’s portfolio manager. “RAC intends to provide its proven capital allocation framework to the board of Astoria.”

RAC’s deep-value investment style is profoundly different to that of the current manager. To change managers requires shareholder approval. If this were to happen, Anchor has the right to claim compensation equal to five times gross the annual management fee, which is 1% of assets under management, notes Vunani investment analyst Anthony Clark.

In 2017, that fee was $1.367 million. Thus, Anchor, upon any vote succeeding for change of management, would be entitled to between R80 and R90 million, depending on the exchange rate.

There’s another angle RAC may be looking to exploit, Anchor Capital CEO Peter Armitage noted: “Aside from the fact that Astoria is domiciled in Mauritius, it has Reserve Bank approval to invest further funds offshore. This makes it a very valuable structure.”

Armitage said that “at the end of the day the Astoria board will act in the interest of shareholders. We will have the offer independently assessed and if it is fair and reasonable, then we will recommend that shareholders accept it”.

The offer is conditional on RAC achieving a 50%-plus stake in Astoria and Astoria shareholder approval of the top-up payment terms. Shareholders willing to sell their shares will be paid in cash. If shareholders agree to sell more than 28.74% in shares (R355 million), they’ll be paid in cash and RAC participating preference shares, currently trading at R20 a share.

The offer is also conditional on the approval of RAC shareholders.

Moneyweb

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