York Capital launches bid for Fondo Delta with CVR

After Elliott Associates launched a bid for four Italian REIFs less than two weeks ago another hedge fund has announced that it also wants to join the party. York Capital Management (I never heard of the name, but apparently they have $14 billion of AUM) will launch a tender offer for Fondo Delta, another stock that happens to be in my basket of Italian REIFs. The offer is for up to 60% of the outstanding share capital at a price of €54/share which is a premium of just 11.7% compared to the closing price yesterday and a price 40% below NAV of €92/share.

While the premium is small York Capital Management has structured the offer in such a way that shareholders will get an additional consideration if the fund can be liquidated close to NAV. Depending on the timing of the liquidating selling shareholders would receive between 18 and 30% of the liquidation proceeds above €75/share. Since that is roughly a 20% discount to NAV there is a reasonable probability that shareholders will receive some additional consideration. With the stock currently trading at €52 the spread, excluding the value of the CVR, is 3.8% which looks pretty attractive to me. Because of that I decided to add a bit to my position today with the intention to tender it in the offer.

Marina di Cutro, property of Fondo Delta


Author is long Fondo Delta

15 thoughts on “York Capital launches bid for Fondo Delta with CVR

  1. Max

    Hi AV,

    I think this is a ridiculous and badly designed offer.

    If the fund liquidates at NAV (EUR92), unitholders will receive only 4 euros in 2 years time plus the 54 euros which they receive at the end of the offer. But the extra bonus is not even sure.

    As the fund has decent assets with long-term contracts, generates good FOF, has very small leverage and is close to its liquidation deadline (Dec 2017), I don’t see any reason to tender any share.

    1. Alpha Vulture Post author

      Well, as long as you are offering some sort of premium compared to the latest market price I don’t think an offer is ridiculous. If it would be so ridiculous the market price should have been higher. Apparently plenty of people are willing to sell at prices below 54 euros, so what they are doing makes sense. And I actually think the extra bonus is a pretty nifty feature since it allows people to participate a bit in the potential upside of the stock while retaining zero risk when selling and getting immediate liquidity.

      That said, I’m only going to tender the additional shares I bought today and I will retain my original position since I also believe that by waiting I’m likely to realize higher returns.

  2. cogitergosum

    Thanks for the post. Tendering only makes sense from the logic of a quick relatively risk-free workout situation because the opportunity cost of not getting your principal back quickly (from the 60% buyout) is greater than the realistic liquidation proceeds the remaining 40% holders could get the benefit of within 2 years.

    Tendering = Tails I certainly don’t lose, Heads I don’t win much
    Not Tendering = Tails I probably don’t lose, Heads I win a lot

    Depends on how one weighs those odds

    1. Alpha Vulture Post author

      I don’t think that you have to worry that when you buy this as a short term work out situation that you get stuck with a bunch of shares that will not be accepted in the offer. I think plenty of people will not tender (like yourself), so I’m not sure that the 60% threshold will be met. And when the tender is successful I don’t think shares go back down to the undisturbed price because having a hedge fund as a big shareholder should be bullish news since they will presumable be pushing for a fast liquidation.

  3. Ben

    Thanks for the interesting write up. Does anyone have a sense for the likelihood of US residents getting hit with withholding tax if they participate in this tender?

  4. Alex

    Hi Alpha Vulture

    Stupid question, but where can I find the official press release and precise deal terms? They are not showing up on my IB news screen nor are they posted on the online IR section.

    Is there a minimum acceptance level for the tender to occur? Does York already own shares? Any idea of what the shareholder base looks like and what tender rate could be?

  5. Rufko

    What you think about this nonacid offer?
    I bought some.
    First Marblehead (NYSE:FMD) will be acquired by FP Resources USA Inc. for $5.05/share in cash, or $65.5M.


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