Wed, 20/06/2007 - 07:00
Third Point, the activist US hedge fund manager headed by Daniel S Loeb, has launched an initial public offering of shares in Third Point Offshore Investors, a newly-established Guernsey closed-ended investment company, to be listed on the main market of the London Stock Exchange.
The IPO is seeking to raise about EUR500m through a public offer of ordinary shares in the UK, with the prospectus passported into certain European countries, and private placements elsewhere. The offer will comprise three currency classes at EUR10 per euro share, USD10 per US dollar share and GBP10 per sterling share.
The company will apply to the UK Listing Authority, part of the Financial Services Authority, for a secondary listing under Chapter 14 of the listing rules, an avenue that is expected to be shut off when the FSA adopts a single listing regime for closed-ended funds.
The net proceeds of the IPO will be invested in the existing Cayman-domiciled Third Point Offshore Fund, which pursues an event-driven, value-oriented investment approach based on bottom-up fundamental analysis. Third Point Offshore Investors will have a target return of 15 per cent per annum, net of all costs and expenses.
'Since starting Third Point more than 12 years ago we have seen very strong annual returns, with an average of 23.1 per cent for the Third Point Offshore Fund over its 10-year life,' says Loeb, the firm's chief investment officer.
'Now we are delighted to be in a position to offer shares in Third Point Offshore Investors to public investors so they can effectively gain access to our largest fund. We believe we will be the first US hedge fund to list a single manager fund on the London Stock Exchange, which would be a significant milestone for Third Point.'
The Third Point Offshore Fund has outperformed the S&P 500 in eight out of its 10 years of existence; results have been achieved with a relatively low correlation to equity markets and with an average volatility lower than the S&P 500. The fund is currently closed to new investors and will remain so for at least 12 months following the IPO.
Third Point applies a single investment process across all of its funds, research-driven and based on fundamental value, to identify situations in which a potential event could lead to a significant revaluation, up or down, in a company's securities.
According to Third Point, positive potential events could include operational restructurings, recapitalisations, or change in management or sale of a company. Negative potential events could include a liquidity crisis, legal defeat, or the exposure of accounting or other irregularities. The funds managed by Third Point have the capacity to take large positions in companies and to influence their affairs, increasing the likelihood of the catalysing events occurring.
Third Point will receive an annual management fee of 2 per cent of net asset value and an incentive fee of 20 per cent of NAV growth, subject to a high water mark and related adjustments. Principals of Third Point will make a 5 per cent investment in the Guernsey company.
The underlying master fund, Third Point and its affiliates will be able to purchase shares in Third Point Offshore Investors in the after-market in order to control any discount in the value of the shares in relation to NAV, and a buy-back programme will be considered if the shares trade at or below 95 per cent of NAV.
UBS has been appointed global co-ordinator, bookrunner and joint lead manager for the IPO, and Société Générale has been appointed joint lead manager. The offer size statement containing the number of euro, US dollar and sterling shares to be offered will be published on or about July 18 July, and trading is scheduled to begin on July 23.
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