Magellan Financial Group is combining three of its global equity funds into one single merged trust – the Magellan Global Fund – which is intended to be quoted on the Australian Securities Exchange.
In an announcement, Magellan said the three funds were its unlisted opened-ended Magellan Global Fund, the listed opened-ended Magellan Global Equities Fund and the listed closed-ended Magellan Global Trust. The merged trust would have an open class and a closed class.
The merged fund would have approximately $15 billion in funds under management and its chair, Hamish Douglass, said he believed combining the into a single, unified trust with a listed open class unit, which could also be transacted off-market, and a listed closed class unit was “a ground-breaking innovation”.
“We expect it will lead to simplification and efficiencies for unitholders and importantly should improve the trading price of closed class units,” he said.
“We also believe that the follow-on entitlement offer structure and bonus option issue to subscribe for new closed class units at a 7.5% discount to the prevailing net asset value should be attractive to unitholders in the combined trust.
“Importantly the cost of the benefits under the entitlement offer and bonus option issue will be borne by Magellan Financial Group consistent with our partnership approach. Magellan Financial Group should generate an attractive financial return from funding these partnership benefits.”
The combined fund intended to undertake a one-for-four entitlement offer to its open and closed classed unitholders to subscribe for new closed class units with an attached bonus three-year option.
“Unitholders will have the ability to subscribe for new closed class Units under the entitlement offer at the prevailing NAV per unit and receive a valuable partnership benefit in the form of additional closed class units worth 7.5% of the value of their subscription,” the announcement said.
“Applicants who are allotted new closed class units will also receive one option for each new closed class unit issued under the entitlement offer with each option exercisable into one closed class unit at an exercise price set at a 7.5% discount to the prevailing NAV per unit at the time of exercise.
In addition, Magellan also proposed to issue a bonus option to closed class unitholders in Magellan Global Fund on the basis of one option for every two closed class units held, with each option exercisable into one closed class unit at an exercise price set at a 7.5% discount to the prevailing NAV per unit at the time of exercise.
To fund the restructure, Magellan Financial Group would pay the full costs and compensate the Magellan Global Fund for the partnership benefits being offered under the entitlement officer. The funding and any benefits would come from existing financial resources, including an undrawn corporate debt facility.
