Bancorp fund aims to cash in on takeover

By Nick Stride

Friday 13th February 2004

The upsurge of corporate activity in Australia and New Zealand has prompted investment bank Bancorp to launch a merger arbitrage fund.

The fund is offering 20 million $1 units and the offer closes on March 19.

Managing director Craig Brownie said when a takeover offer was announced the offer price was typically above the market price at which the target company's shares were trading.

This reflected the risk the offer would fail and the time until a successful offer was completed.

On average, he said, a takeover would take four months and the initial discount would be about 5%, offering an annualised 15% return.

Greater returns could be made if the offer price was increased, as it has been in three out of four recent New Zealand takeovers. The risk was that a takeover offer would fail.

Bancorp cites Thomson Financial data showing mergers and acquisitions activity in 2003 rose 105% in New Zealand and 66% in Australia.

"From a timing point of view it couldn't be better," Mr Brownie said.

But not every takeover would offer an opportunity.

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