Tetragon Financial Group commences US$50m tender offer
Repurchase of TFG shares at below NAV will be accretive to NAV per share
The US$50m tender offer was initially announced by Tetragon Financial Group (TFG) on 31 October in its Q316 quarterly report. It will be conducted as a “modified Dutch auction” with shareholders able to tender their TFG non-voting shares at prices ranging from US$10.80 up to US$12.00 per share. The offer is expected to expire on 8 December 2016, with the determined purchase price and any proration factor announced on 13 December 2016 and the purchase of shares settled promptly thereafter. This offer for up to US$50m follows TFG’s US$100m tender offer in June 2016 under which 10m TFG non-voting shares were repurchased.
The repurchase of shares at a price below NAV through the tender offer will reduce TFG’s net assets but will be accretive to NAV per share. TFG’s fully diluted fair value NAV per share was US$20.05 at 30 September 2016. Based on TFG’s US$1,946.3m fair value NAV and 97.1m fully diluted shares in issue at 30 September 2016, a repurchase of the maximum 4.6m shares at US$10.80 per share would result in an estimated 2.3% increase in NAV per share to US$20.51. TFG’s NAV total return was 7.8% for the first nine months of 2016 and the effect of this uplift to NAV per share would be to increase TFG’s year-to-date NAV total return to 10.3%.
Prior to announcing this latest tender offer, TFG entered into an agreement to repurchase approximately 593,653 non-voting shares of TFG held by Michael Humphries, a manager of certain Polygon funds, at a purchase price based on the volume-weighted average price (VWAP) per share for the first 10 trading days in November 2016. Based on the month-to-date VWAP of US$11.00, this share repurchase would increase NAV per share by 0.3% or US$0.06 in addition to the tender offer.
Eligible shareholders will be able to indicate how many TFG non-voting shares and at what price or prices within the specified range they wish to tender. Based on the number of shares tendered and the prices specified by the tendering shareholders, the lowest price per share within the range will be determined that will enable the purchase of US$50m in value of TFG non-voting shares, or a lower amount if the offer is not fully subscribed. All shares will be purchased at the same price in the offer.
Full details of the tender offer, including complete instructions on how to tender shares, are included in the offer to purchase which is available on TFG’s website.
Read Edison’s most recent research report on TFG here.
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