MFS seeks ‘back-door’ listing

Boutique fund manager MFS Group is set to list on the Australian Stock Exchange (ASX) via a ‘back-door’ listing after announcing plans to merge with a publicly floated investment trust the company already owns.

The diversified investment group released an explanatory memorandum yesterday afternoon notifying the ASX and shareholders that MFS’ board of independent directors had backed a proposal by consultant firm, BDO Corporate Finance, backing a merger with MFS Leveraged Investment Group.

The latter comprises the MFS Leveraged Investment Trust, which was formerly known as the Commonwealth Mortgage and Securities Trust and was acquired in 2001 with only $1 million in funds under management. Today it has total assets of more than $50 million through a portfolio of non-conforming property loans.

The merger proposal, if accepted by shareholders in a vote scheduled for December 21, will result in a single entity - MFS Limited that will have a market capitalisation of more than $160 million and external assets under management of more than $1.7 billion.

MFS executive chairman Philip Adams, who will assume the same role in the merged entity, said if the proposal goes ahead it would seek to raise capital next year to fund the growth of the business. However at this stage Adams said there were no specific plans to raise capital.

The proposal will involve MFS LIG issuing 80 million new shares at $1.50 each to replace the $120 million MFS shares it will acquire as part of the deal. It will also issue 2.8 million new staff options to replace MFS’ existing staff options.

The deal will not involve any cash payments however as the acquisition is entirely via an exchange of shares and options.

MFS will then aim to commence trading as the combined entity on January 7, 2005.