Lindsell Train Investment Trust (LTIT) has published a circular for a tender offer covering up to 20% of its issued share capital. Shareholders will be able to tender up to 20% of their individual holdings, subject to approval at a general meeting on 8 October. The trust could buy back up to 4 million shares.
The tender price will be set at a 5% discount to net asset value (NAV) per share, struck at the close of business on 9 October, with costs and expenses tied to the tender added back to NAV for the calculation.
LTIT's shares currently trade at a discount of 19.5%, against a five-year average of 9.1%, according to Trustnet data.
Lindsell Train Investment Trust’s premium/discount over 5yrs
Source: Trustnet
The board said the tender was designed to address that discount while giving Lindsell Train's investment approach more time to recover, following annualised NAV returns of -7.1% over the past five years. That compares with a longer-term record of 10.5% a year since the trust's 2001 launch, ahead of the MSCI World Index's 7.8%.
Roger Lambert, chair of Lindsell Train Investment Trust, said the offer would "put choice directly into shareholders' hands", providing "those who wish to exit with a clear, time-limited route to liquidity at a price closely linked to the trust's underlying asset value, while enabling LTIT to continue operating and giving its strategy time to deliver".
Investment manager Lindsell Train Limited will buy back enough of its own shares from the trust to keep LTIT's proportional exposure to the manager unchanged once the tender completes. Neither the trust's directors nor joint founder Nick Train and Michael Lindsell will participate in the tender, which the company said reflected their continued confidence in the strategy.
This looked like “a sensible compromise” to Richard Williams, senior analyst at QuotedData.
“A tender at a 5% discount to NAV offers shareholders who have lost patience an opportunity to exit a meaningful portion of their investment at a price likely to be considerably better than could otherwise be achieved while the shares trade on a wide discount,” he said.
“At the same time, it avoids forcing more fundamental change on shareholders who continue to believe in Lindsell Train's highly concentrated, long-term approach.”
He also praised the treatment of the Lindsell Train stake as “sensible”, so the proportional exposure to the asset manager does not balloon as the rest of the trust's assets shrink through the tender.
“A tender can only do so much, and a sustained narrowing of the discount requires an improvement in investment performance after what has been a very difficult five years for the trust,” he concluded.