Last week, Macquarie International Infrastructure Fund Limited (MIIF) announced the completion of the Strategic Review which was initiated in June 2012.
The Strategic Review, which included an assessment by CIMB Bank Berhad, Singapore Branch (CIMB) and consultation with a cross section of shareholders, generated the following key observations:
- MIIF’s current share price does not adequately reflect the value of MIIF’s infrastructure businesses;
- MIIF’s current structure may not be the most appropriate structure to reflect the value of its businesses;
- Taiwan Broadband Communications (TBC), Changshu Xinghua Port (CXP) and Hua Nan Expressway (HNE) are each generating sustainable cash distributions which underpin their respective values; and
- Executing MIIF’s stated strategy of investing directly in operating Asian infrastructure businesses is constrained by MIIF’s current share price and the prevailing market environment.
After considering the above observations and assessing the alternatives available to MIIF, the Board has concluded that in order to maximise value for MIIF’s shareholders the strategy for MIIF should change. As a result, the Board has decided to undertake the following initiatives:
- Distribute existing excess cash to shareholders as a one-off special dividend;
- Commence a joint process with Macquarie Korea Opportunities Fund (MKOF), MIIF’s TBC co-shareholder, to realise maximum value for their investment in TBC;
- Pursue the orderly divestments of MIIF’s interests in HNE, CXP and Miaoli Wind;
- Distribute the proceeds from any divestment to shareholders as soon as practicable; and
- Allow MIIF’s corporate-level debt facility to lapse upon maturity.
These initiatives have been formulated with a focus on maximising and returning value to MIIF shareholders. The Board will endeavour to execute these initiatives in a timely manner; however, these initiatives involve complex processes which will require active management and prudent actions to safeguard the interests of MIIF shareholders.
The strategy will substantially alter the focus of MIIF. The Independent Directors of the Board have concluded that the change in MIIF’s strategy requires an amended approach to the arrangements with MIIF’s Manager1. The Independent Directors will seek to restructure the Manager’s fee arrangements to realign the interests of MIIF and the Manager.
And so, this fund is finally going to sell off all their assets, return the money to shareholders and close down.
But no kidding me, you need to spend money to appoint a financial adviser to come up with all these recommendations?
While the share price has gone up slightly in anticipation of the higher dividends from the distribution of excess cash, I don’t think the divestment of assets will be easy. Whether they can sell their assets at the valuation they want is a big question mark.
It will probably take a while (a couple of years maybe?) and if they can’t find suitable buyers for any of their assets, the fund will not be able to delist.
In the meantime, the fund will have to continue to pay management fees to Macquarie.