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ALTIN to implement planned share buyback through tradable put options

Fri, 19/07/2013 - 14:03

The board of directors of Swiss alternative investment company ALTIN has decided to implement the capital reduction programme announced in March 2013 through the issuance of free, tradable put options.

 
The put options will be assigned to all shareholders with a strike price set at an attractive premium to the market price.
 
With this action, ALTIN's board of directors reaffirms its strong commitment to better align the share price of the company with its NAV and hence to reduce the discount in the best interest of all shareholders. The board intends to take all necessary measures to achieve this goal in a sustainable way that benefits all shareholders.
 
As a result of the recent amendments to Switzerland's stock exchange regulations, a share buyback conducted through a traditional second trading line has become very ineffective for ALTIN. Indeed, as of 1 May 2013, daily share buybacks are now limited to 25 per cent of the daily average trading volume. Given the situation encountered by ALTIN, a buyback programme could have lasted up to two years in order to buy back the maximum permissible 10 per cent of its share capital. The board announced on 10 June 2013 that it was therefore looking for more effective alternatives to reduce the share price discount.
 
After a review of the available buyback methods, the board of directors has decided to implement the capital reduction through the issuance of free, tradable put options. Shareholders will either tender ALTIN shares at a fixed strike price during a limited time period via the exercise of their put options, or, since the puts are freely tradable, sell them in the market.  The board of directors will determine a strike price at a level that better reflects its understanding of a fair valuation of the company, making the tendering of the shares very attractive and, at the same time, ensuring that the put options will have a significant intrinsic value. Similar to a share buyback through a second line trading, tendered shares will then be cancelled after AGM approval, which will result in the intended capital reduction as well as NAV per share accretion.
 
Buying back shares through tradable put options offers several advantages over the conventional buyback on a second trading line. Firstly, given the strong limitations on the daily buyback volume introduced by the new regulations, a put options solution allows for a much faster capital reduction process (two to four weeks compared with 24 months). Secondly, as the strike price will be set at an attractive premium to the market price, the put options benefits will be clear to all shareholders. The board of directors expects a high exercise ratio and is confident that this solution is simple and ensures that all shareholders can directly participate. This solution provides an equal treatment of all investors, since all shareholders can directly or indirectly participate in the buyback plan.
 
The issuance of the put options should take place in mid-September but the exact date will be confirmed at a later stage, together with all the necessary technical details (e.g. exercise period, options per share ratio, strike price, trading details).
 
This time frame has been decided in part for technical reasons (regulatory approval by the Takeover Board and Swiss Stock Exchange, appointment of the investment bank), which are expected to take about a month, but mainly to avoid the European holiday season and thus to ensure that all shareholders are informed and in a position to participate in the buyback.


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