WAM Active hits back at Keybridge Capital proposal

WAM Active Limited has told its shareholders to take no action when receiving documents from Keybridge Capital Limited and to throw away any correspondences about their proposed bid.

On Friday, Keybridge made an off-market takeover bid for all currently issued fully paid ordinary shares in WAM Active.

Keybridge’s proposed takeover would have a 10-year term for an all scrip bid consideration of $1.16 per WAM Active share, with a gross running yield of 2% each year, inclusive of franking.

However, WAM Active’s chairman Geoff Wilson, told shareholders its board members would instead continue to focus on the company’s strategic goals and investment objectives.

“As a significant shareholder in Keybridge, WAM Active has long-standing concerns about the conduct and corporate governance of Keybridge and its continued waste of shareholder funds. This is another case in point,” said Wilson.

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“From my perspective this intended proposal is a complete waste of shareholder’s time.”

Wilson provided his personal mobile phone number to shareholders if they had questions or comments to make about the proposed takeover bid.

Wilson said the proposed bid was not genuine because:

• The Convertible Redeemable Promissory Note (CRPN) redemption rights were largely illusory – Keybridge was able to “override a holder conversion request and instead redeem the CRPN for cash or ordinary shares [of Keybridge] at its discretion” even if against the individual wishes of noteholders;
• There was no reasonable basis to value the proposed bid at $1.16 per WAM Active share given the likely liquidity and discount of the CRPNs based on previous trading patterns;
• Keybridge was materially smaller than WAM Active and without shareholder approval for the CRPNs, Keybridge lacks the funding required to formalise the proposed bid;
• the sheer number and breadth of the defeating conditions to the proposed bid; and
• the CRPNs intended to be offered as consideration are subject to Keybridge shareholder and Australian Securities Exchange (ASX) approval.

He said the proposal was frivolous and would disadvantage WAM shareholders because:

• The proposed consideration was for CPRNs, which had terms that contemplated an interest rate of only 1.4% per annum plus franking over 10 years, at which point Keybridge could elect to issue ordinary shares rather than redeem the CRPNs for cash.
• This return was “significantly lower” than remaining a WAM Active shareholder – WAM Active’s 6 cents FY2021 fully franked full year dividend provided shareholders with a fully franked dividend yield of 5.6% and a grossed-up dividend yield of 8.0%.
• There was “no reasonable basis” for valuing the bid at $1.16 per WAM Active share, as the it incorrectly assumed that CRPNs, if listed on the ASX, would trade at face value.
• Keybridge issued CRPNs previously with a 7% per annum return over five years, which traded at a discount to face value of up to 10% and were “very thinly traded”.

In September, the NSW court of appeal upheld an earlier decision made in the NSW Supreme Court to dismiss the majority of an appeal made by Keybridge to have its shares acquired by WAM Active.

Money Management contacted Keybridge Capital Limited for comment.