Wilson bulks up with funds swoop

Geoff Wilson’s WAM Global is gobbling up rival Templeton Global Growth Fund.

Fund manager Geoff Wilson at Double Bay in Sydney's east. John Feder/The Australian.

Geoff Wilson’s WAM Global is gobbling up rival Templeton Global Growth Fund, pulling the trigger on a merger that will swell its assets under management to over $900m.

Announcing the tie-up to the market on Tuesday, WAM Global said it would buy the 85.3 per cent of Templeton shares that it doesn’t already own via a scheme of arrangement.

Templeton shareholders will get WAM Global shares and options based on the relative NTA per share of both funds, before deferred taxes.

There will also be a cash alternative for Templeton shareholders, who can cash out based on the NTA per share after current and deferred taxes and transaction costs.

The move comes just days after investment conglomerate Washington H Soul Pattinson announced its own merger with ASX-listed Milton Corp, as consolidation in the LIC sector heats up.

“It‘s fantastic for both sets of shareholders,” Mr Wilson said of the merger.

“The Templeton Global shareholders get a liquidity event and for WAM Global shareholders, it propels WAM Global to be in the top three global LICs.”

“Templeton shareholders are getting NTA. They either get NTA through the Templeton Global buyback or a WAM Global share and a WAM Global option,” he said.

The ratio will be set when the NTAs are set on September 30.

The move comes a number of years after WAM Global first bought shares in the $300m Templeton Global fund. Over time, it increased its holding in the company to 14.6 per cent.

The move to merge was sparked by Templeton’s announcement last October that it would undertake a strategic review of its operations, Mr Wilson said.

“We started buying Templeton about six years ago at an 18 per cent discount to NTA. We communicated with management to work with them and help them reduce that discount.

“So we were surprised when the board last year came out and said they were going to review the structure,” he said.

Templeton Global Growth has been listed on the ASX since 1987 and is part of the giant US investment group Franklin Templeton Investments, with global funds under management of $1.9 trillion. It

The move to merge made sense to get the benefits of scale, Mr Wilson said.

“As the largest shareholder we thought it made sense to put TGG and Wam Global together to actually get all those benefits of scale, which, as we‘ve seen with Soul Patts can be significant, and then with the share price, as well. So that was the angle we were coming from there.”

Soul Patts a week ago outlined plans to scoop up listed investment company Milton in an all-scrip merger that would take its market capitalisation to $10.8bn and boost managing director Todd Barlow’s firepower by $3.6bn as he looks to beef-up the conglomerate’s portfolio with unlisted assets and global equities.

The tie-up was tipped to kick off a round of mergers among other funds looking to rapidly increase scale as they battle against an investor rush toward listed exchange traded funds (ETFs).

Soul Patts' share price has jumped 10 per cent since the merger announcement.

Despite expectations of further consolidation in the LIC space, Mr Wilson, who launched his $225m WAM Strategic Value fund on Monday, said he was a big believer in the sector.

“We would like the listed company sector to continue to grow and prosper and for there to be more listed investment companies.

“The fact that we were able to raise the money (for WAM Strategic Value), the $225 million, and oversubscribed, and then yesterday listed and traded at a premium to NTA, to me that‘s very positive for the whole sector.”

WAM Strategic Value, with the ticker WAR, is hunting underperforming listed investment companies, but is in no rush to make its next move.

“Our position is, with LICs, we‘re very patient. We’re looking to buy $1 for 80c and help people get their 80c to be worth $1,” Mr Wilson said.

“There‘s no one (specifically) on the radar but things happen. If you had asked me a year ago if there were any takeover bids on the radar I would have said no. This only came about because the TGG board said they were going to review the structure and we put a proposal to them.”

In the last year, WAM Capital has made moves on the ASX-listed Concentrated Leaders Fund and Contango Income Generator. It also made a bid for amaysim, which Mr Wilson described as “a cash box”.

Further consolidation in the sector is likely, Mr Wilson said.

“The ETF industry was always going to grow at a multiple to the LIC industry because ETFs are open-ended structures, so they can raise money at any time.”

LICs, meanwhile, are closed-ended and constrained in their ability to raise capital.

Mr Wilson’s WAM Capital will jump from fourth to third-largest LIC when Milton is swallowed up by Soul Patts, while its move to gobble up Templeton will see WAM Global become one of the top three global LICs.