This morning, I was surprised when I saw the announcement by Macquarie International Infrastructure Fund Limited (MIIF) on their divestment plan for their Taiwan Broadband Communications (TBC) stake.
For those who have not been following the story, MIIF has the intention to sell off all their assets. This comes after a review of their business and an attempt to unlock value for their shareholders.
Fair enough.
However, many shareholders are already unhappy about the manager’s attempt to squeeze more money from shareholders by changing the management fee.
That is a story for another day.
But this divestment plan is either very brilliant or plain stupidity (depending on which angle you look from).
The idea is to inject TBC into Asian Pay Television Trust (APTT), a business trust that will be listed on SGX.
There will be a Minimum Valuation for the divestment, which is set at 95% of the valuation of TBC ($469.5 mil).
It is noted that over the last 18 months, certain third parties have provided unsolicited trade sale offers indicating interest in acquiring TBC. Some of these parties undertook third party due diligence and following their due diligence provided indicative offers for TBC at pricing levels below the Minimum Valuation and with conditions.
So now you have a situation where sophisticated buyers (after doing due diligence) are not willing to pay anywhere near the Minimum Valuation, and a decision is made to get ride of TBC by doing an IPO.
Shareholders of MIIF will have the option of receiving shares in APPT or cash ($0.408/share).
Existing shareholders of MIIF who decide to hold on to APPT shares will have gone through a silly roundabout exercise, changing from one listed entity to another. In the process, incurring hefty listing fees and being charged a performance fee by the manager.
And I certainly wouldn’t want to buy shares in APPT at their IPO price, given that sophisticated buyers are already not willing to pay such a price for it.