The board of UK Mortgages (UKML) has rejected the "final possible offer" from M&G Investment Management (MAGIM), which it issued only this morning.
In a statement, UKML acknowledged receipt of the increased offer made by MAGIM earlier today valuing the company at 70p per share, which it believes "undervalue[s] the company and its prospects", is not "recommendable to shareholders" and in turn "sees no basis for engagement" with the offer.
It added that the offer can only be increased "in the event that a third party announces a firm offer" and has confirmed that it is "not in discussions with any third party at this time, nor has it been previously".
The board confirmed that its "review of future strategy" would go ahead as planned, once the company is no longer in an offer period under the Takeover Code.
"The review would be with the aim of maximising the value created for and delivered to shareholders from the high quality assets that are within the company's portfolio and would seek to provide shareholders with a strategy that delivered an understood pathway to enhanced liquidity as well as a narrowing and removal of the discount at which the shares trade versus the NAV."
Chris Waldron, chairman of UKML, said: "The board considers that the final possible offer continues to be an undervaluation of the company and does not believe this valuation is recommendable. In addition, the noard reiterates its intention to launch a review of future strategy with the aim of maximising value delivered to shareholders."
Final Possible Offer
Earlier today, MAGIM increased its offer for home loan investment fund UKML as it pleaded with shareholders to force the board to engage before the Takeover Code deadline.
The "increased and final possible offer" of 70p per share marks a 4.5% increase, or 3p per share, on its 20 July offer, which values the existing issued share capital of UKML at rooughly £191m, representing a 26% premium to the UKML closing share price at 17 July, a 35% premium over the one-month volume-weighted average price and a 42% premium over the three-month volume-weighted average price.
MAGIM has accused the board of UKML of refusing to engage and has defined this increased offer as a "final attempt" to engage with the board ahead of the 17 August deadline mandated by the Takeover Code, which would effectively prevent MAGIM making another offer for six months.
The revised offer comes following a 7 August announcement by UKML of a "Review of Future Strategy", which could see the fund consider options ranging from reconstruction through a partial sale of assets up to an orderly wind up of the company to return capital to investors, rather than accept MAGIM's offer.
MAGIM believes that announced offers shareholders "no real certainty" about the long term prospects of the firm and "falls short" of providing guidance on the firm's revised cashflow forecasts, pointing to its own final proposal which "improves on an already attractive possible offer for UKML shareholders" and offers a "chance to exit at an attractive price without delay or uncertainty".
The true value of the company is also disputed by MAGIM, which reiterated its belief that, given the "continued uncertain outlook for the underlying assets", the reported monthly NAV does not reflect said value and stated UKML is "unlikely to achieve an equivalent valuation for its shareholders given its structure".
Manager of the fund, TwentyFour Asset Management, is also the largest shareholder of the company, owning or controlling approximately 17% of its voting share capital, which MAGIM acknowledges it needs to sway to be able to "affect the proposed transaction".