Elliott Associates, one of the worlds most successful hedge funds, has launched a bid to acquire the share capital of four Italian REIFs. Last year I spend some time analyzing this sector, and decided to buy a basket of seven different funds. I found these attractive because the funds all trade at large discounts to NAV (often >50%) while they are all liquidating and returning capital to shareholders to coming years. It’s good to see that a big and successful hedge fund is apparently seeing the same value, and has launched a bid for four funds.
Elliott Associates is offering roughly a 25% premium compared to the undisturbed market price, and the big question is of course should I be happy with this and tender my shares or should I keep my position? Elliott Associates is obviously expecting to generate “adequate” returns even at a 25% premium, and I’m pretty sure that what they consider adequate is also good enough for me. On the other hand I also could just take the money now, and try to reinvest it in one of the many other attractive looking Italian REIFs.
A third angle to consider is whether or not a position is warranted just to play the merger arbitrage game. The current spread between the market price and the offer is roughly 6% which is pretty nice. The biggest issue is that Elliott Associates will only accepted tendered shares if they are able to acquire more than 50% of the outstanding share capital, and I have no idea how to handicap the odds of that happening. I can imagine that many shareholders, like myself, aren’t exactly jumping at the opportunity to sell those funds at a 40 or 50% discount to NAV.
What do you think the wisest course of action is here? I think I’m currently leaning towards keeping my positions, and just letting things play out till the funds liquidate.
Author is long QFAL.MI, QFID.MI and various other iREIFs.