Fisher Funds treads carefully around second takeover bid

Fisher Funds could capitalise on a takeover bid that offers a 40% premium to the share price for the second time in a week, but is being far more cautious about the latest offer.

On Monday, the funds manager revealed Japanese cosmetic giant Shiseido’s offer for Bare Escentuals would pay off for the three New Zealand funds managed by Fisher Funds which all hold shares in the company.

That deal would see the net asset value of listed company Marlin Global rise by $1.7 million under the offer, with further gains for the Fisher Funds International Growth Fund and the Fisher Funds KiwiSaver Growth Scheme.

A second takeover bid – which has seen the management of Chinese fashion shoe retailer Hongguo International Holdings offer to acquire all of the outstanding shares for a price 37% above the current market price – would see Marlin Global’s value rise by another $1.3 million.

But while the Bare Escentuals bid has received Fisher Funds’ backing, it was showing more caution over the second takeover bid this week.

With the share price for Hongguo Holdings – which is based in China and listed on the Singapore exchange – now 120% higher than 12 months ago, portfolio manager Ken Applegate said the long-term value of the company was high.

“The management of Hongguo clearly recognise this, which is why they are seeking to take the company private. As substantial shareholders we will continue discussions with the management and other large shareholders, to maximise the value for our investors.”

The Fisher Funds International Growth Fund, the Fisher Funds KiwiSaver Growth Scheme, and listed company Marlin Global, are all holders of shares in Hongguo.

With almost 4% of Marlin Global invested in Hongguo, Fisher Funds is the company’s largest institutional shareholder.

Fisher Funds managing director Carmel Fisher said investors must weigh the positive short-term benefit against the long-term gains that will be lost if an offer is accepted.

“In the case of Hongguo, we bought the company two years ago to capitalise on the urbanisation of China driven by the emerging middle class. This trend is still developing and Hongguo will be a major beneficiary. The 37% takeover price premium undervalues the company’s earnings potential over the next three years, hence our reluctance to immediately accept this offer from management.”

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