Genesis Emerging Markets Fund (GSS.L) – Upcoming Tender Offer – 7% Upside

Current Price: £9.03

Offer Price: £9.62

Upside: 7%

Expiration Date: TBD

Press release

 

Genesis Emerging Markets intends to launch tender offer for 25% of its outstanding shares at 98% NAV price. Based on the most recent NAV of £9.82/share, tender consideration stands at £9.62/share - 6.5% upside to current prices. The offer is conditioned on shareholder approval. The meeting is planned for next month and the tender is likely to be launched shortly after that. Current discount to NAV is equivalent to the average over the last year, thus even if the tender is prorated, I would expect shares to trade at a similar discount to NAV post tender.

GSS focuses on emerging markets (mostly Asia and Russia) and has a fairly strong historical correlation to MSCI Emerging Markets index, so NAV exposure could be effectively hedged by shorting $EEM.

The tender offer will be launched in fulfillment of GSS obligation to buy back shares if the fund did not outperform the benchmark (MSCI Emerging Markets index) over 5 years ending on the 30th of June'21. The benchmark was missed by only 1%. At the moment, the company intends to change its investment manager to Fidelity (shareholders will also vote on this in August). The management fee is expected to decrease from 0.9% to 0.6%. Additionally, Fidelity agreed to a 9-month fee waiver. The upcomig transition to a much bigger name investment manager with lower fees might incentivize shareholders not to tender their shares.

Discount to NAV:

Correlation with MSCI EM index:

Shareholders:

  • City of London Investment Management - 28%;
  • Strathclyde Pension Fund - 22.2%;
  • Lazard Asset Management - 12.1%;
  • 1607 Capital Partners - 3.44%.

Portfolio information:

2 COMMENTS

  1. snowball

    EGM date has been set on or around 1 October, and tender offer (subject to EGM approval) pricing and closing is expected in mid October.

    “Further to its announcement on 1 July, the Company expects to hold an extraordinary general meeting on or around 1 October 2021 (the “EGM”) to approve matters relating to the appointment of FIL Investment Services (UK) Limited as its new manager, with FIL Investment Services (UK) Limited taking over the management of the Company shortly thereafter.

    The Company also expects to commence its tender offer for up to to 25 per cent. of its participating preference shares in early September, at the same time as the dispatch of the notice of the EGM. The tender offer will be conditional on shareholder approval being approved at the EGM, with the tender offer closing, and the tender price being calculated following the EGM in mid-October 2021. ”

    https://www.londonstockexchange.com/news-article/GSS/update-on-change-of-management-arrangements/15088231

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