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Better Capital soars 10% on Gardner bid

Long-awaited bid for Gardner Aerospace should generate big pay-out for shareholders in Jon Moulton's underperforming Better Capital trust.

 
Better Capital soars 10% on Gardner bid

Venture capitalist Jon Moulton's Better Capital 2009 (BCAP ) soared up to 10% on news that the investment trust's core holding in Gardner Aerospace was in exclusive talks over a £326 million takeover offer from a Chinese bidder.

If Shaanxi Ligeance Mineral Resources Co (SMLR) clinches the deal to buy Gardner, it should result in a 9.7% uplift to the net asset value (NAV) of BCAP, which invests in distressed businesses and looks to turn them around.

SMLR's cash offer is considerably more than Better Capital's valuation of £280 million for the business in March and could result in a £212 million pay-out to shareholders early next year, according to Numis Securities.

'Netting off the estimated distribution and putting the remaining portfolio on a 50% discount would result in an implied price of 113.2p. This compares with last night’s closing price of 97p, and the share price this morning of 106.25p,' Charles Cade of Numis said.

'The uplift from the sale of Gardner is a little lower than we had hoped, but it is still 10% above carrying value and represents an impressive return over cost,' Cade added.

The shares settled back at 103.5p, up 6.5p or 6.7% on the day, at a 15% discount below NAV.

An announcement about Gardner has been long awaited by shareholders in the private equity fund who have seen the value of their stakes tumble 22% in the past three years after several investments went sour.

Big backers include fund managers Ruffer and BlackRock and the British Empire (BTEM ) and Capital Gearing (CGT ) investment trusts.

BCAP bought Gardner in 2010 and, following falls in its other investments, the company accounted for 69% of the fund's NAV at the end of September, making a sale essential for shareholder prospects.

The news is the latest example of corporate action in the private equity trust sector which has been plagued by wide discounts since the financial crisis, despite generally good performance from the funds.

Last month SVG Capital (SVI ) agreed to a bid from US private equity group Harbourvest while Electra Private Equity (ELTA ) is changing direction after falling under the control of Ed Bramson at Sherborne Investors. Earlier this year he sacked its fund manager Electra Partners and this month the board announced plans to return £200 million to shareholders.

BCAP's sister fund Better Capital 2012 (BC12 ), which was launched four years ago and has fared even worse, also had news today.

It announced that one of its holdings, CAV Aerospace, had been restructured and acquired by Northern Aerospace, a special purpose vehicle within the same group. The deal saves 550 jobs but has required additional funding of up to £7 million. BC12 shares, which have fallen nearly 69% over three years, dropped another 1.25p, or 3.7%, to 32.5p, having closed at a 21% discount to NAV yesterday.

In June Moulton sought to play down rumours that the trust would be wound down, after its valuation fell significantly. The 2012 fund was hit in 2015 by the failure of package delivery firm City Link.

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