Elliott Associates announced today that it would accept all shares that were tendered in the offers launched for Fondo Alpha and Immobiliare Dinamico, despite getting less than 50% of the outstanding shares of the two fonds. The tender offer for Fondo Alpha was the biggest success, and Elliott Associates managed to acquire 24.8% of the outstanding shares for a total consideration of €33.5 million. In the Immobiliare Dinamico offer just 2.5% of the outstanding shares were tendered for a total value of €2.8 million, but together with open market purchases they managed to get a total stake of 4.9%. In the offer for the Polis fund that closed a month earlier they acquired 16% of the outstanding shares. I didn’t sell my shares in the offer, and based on today’s market reaction that seems to have been a good choice. Fondo Alpha is now trading 3% above Elliott’s offer while Immobiliare Dinamico is trading 0.2% above the offer.
Author is long QFAL.MI and QFID.MI
Elliott Associates launched bids for four different Italian REIFs two months ago, and so far they haven’t been very successful in acquiring shares. They managed to acquire 16% of the shares of the Polis fund, but another hedge fund overbid them on the Mediolanum Real Estate Fund and apparently there was little interest from Fondo Alpha and Immobiliare Dinamico shareholders to tender their shares. As a result Elliott Associates decided to increase their bid for those two funds. They raised the offer for Fondo Alpha by 12.4% from €1156.25 to €1300.00 and the offer for Immobiliare Dinamico was increased by 12.5% from €69.31 to €78.00. I didn’t tender my shares in the previous offers, and I don’t intent to tender them in the new offers, but I do find it very encouraging to see the large interest from hedge funds in Italian REIFs. I bought them last year and no-one was interested, and now everybody tries to get a piece of the action:
Author is long Fondo Alpha and Immobiliare Dinamico
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.