Listed fund manager Cadence Capital (CDM) is raising $76.9 million through a private placement as well as bonus options for investors who take up the offer.
Under the placement – aimed at retail and high net wealth investors – Cadence is issuing 53.8 million shares with the price is set at the company’s pre-tax net tangible asset value (NTA) of $1.43 at November 13. The updated pre-tax NTA was $1.47 at November 15, meaning subscribers are getting a slight discount.
Cadence shareholders as at January 14 next year will also be eligible for a one-for-one bonus option issue at $1.43, to expire at August 31 2015, estimated to be worth between 7.5 cents a share and 11.5 cents a share.
The placement is aimed at improving the company’s liquidity and expanding its market capitalisation, which currently sits at $172.4 million.
The first 25 million shares are being prioritised to existing Cadence shareholders as well as RHG shareholders, with 12.5 million shares being allocated to each group.
Managing director Karl Siegling says existing Cadence shareholders won’t be diluted by the placement as long as they hold onto their shares and options.
“Once the options are on the exchange and exist, as our NTA goes up 10 cents the share price will go up 5 cents and the option will go up 5 cents too,” he said.
Siegling said shareholders in listed mortgage book holder RHG were given a priority allocation because of their close relationship with Cadence, which owns over a 17% stake in the company.
Cadence was integral in stopping the privatisation of RHG two years ago, and was more recently involved in the recent takeover action for RHG (RHG), teaming up with Pepper Australia to compete against the offer from Resimac and the Australian Mortgage Acquisition Company. This helped drive up the takeover price to 50.1 cents from 38 cents a share.
Cadence is currently experiencing strong demand for the placement, with investors drawn to the listed investment company’s high yield and strong track record, according to Siegling.
Siegling says Cadence’s yield – between 7-8% when fully-franked – has attracted heavy interest, in particular from self-managed super funds. Of Cadence’s existing shareholder base, around 55-60% are currently SMSFs.
“More money is seeking self-direction and different styles of investment, and that’s kind of where we fit in – we’re not an index-hugging fund,” Siegling said.