The Australian Government Takeover Panel has ruled there are “unacceptable circumstances” which breach the Corporations Act regarding the acquisition of the PM Capital Asian Opportunities fund.
Listed investment company (LIC) PM Global Opportunities fund (PGF) was hoping to acquire PM Asian Opportunities fund (PAF), another LIC run by PM Capital. A vote on this was due to be held on 13 December to determine if this acquisition would go ahead.
Separately, there had been a rival bid for PAF from Wilson Asset Management (WAM) made on 28 September. PM Capital had repeatedly advised PAF shareholders to reject this bid on the basis that it was not in the “best interest of shareholders”. As of 1 December, WAM had a voting share of 11% in PAF.
However, on 6 December, a statement was issued to the Australian Securities Exchange (ASX) from Australian Government Takeover Panel that there had been “unacceptable circumstances.”
This was because extra shares had been bought in PAF. On 29 September, the day after the rival WAM bid was made, PM Capital and Moore Group (the associated entities of PM Capital founder and chief investment officer Paul Moore) increased its shares in PAF from 8.5% to 9.9%. On 13 October, it revised it upwards again from 9.9% to 13.09%.
The acquisition of extra shares surpassed the 3% ‘creep’ rule which governed how many shares a director could buy within a certain time period. No more than 3% extra in voting power was allowed to be acquired in a six-month period.
The panel also noted the same three individuals comprised the board of PM Capital, PAF and PGF, that the PM Capital chief executive, Ben Skilbeck was an executive director of both and neither PAF nor PGF had any employees. This was described as “unusually extensive overlap” by the panel.
In the statement, the panel concluded: “It appears to the panel that a) the acquisition of control over voting shares in PAF has not taken place in an efficient, competitive and informed market and b) the holders of shares in PAF were not given enough information to enable them to assess the merits of the proposed transaction when announced and how it may be affected by the direction”.
In its ruling, the panel stated Moore Group and its associates would be prevented from voting, acquiring or disposing of these extra shares and that, if the acquisition did not go ahead, they should be vested with the Australian Securities and Investments Commission (ASIC) for sale.
A statement from PM Capital said: “PM Capital disagrees with the findings made by the Takeovers Panel, in particular the notion of association between itself and PGF. PM Capital is considering all options, including the potential for an appeal”.
On 8 December, it was confirmed that PM Capital would raise an appeal about the decision.
The vote regarding the acquisition of PAF by PGF was still scheduled to go ahead on 13 December.
