Dec. 19 (Bloomberg) -- Macquarie Group Ltd. plans to shut its Singapore-listed infrastructure fund after selling assets including a port and highway in China because it doesn’t expect its share price to reflect the value of its holdings.
Macquarie International Infrastructure Fund will distribute excess cash as a special dividend and divest three assets following a review by its adviser CIMB Group Holdings Bhd. The fund has about S$60 million ($49 million) in cash, according to Chairman Chiang Meng Heng.
“We were looking at narrowing the discount,” Heng said in an interview in Singapore yesterday. “It will be very, very difficult to close the gap between the share price and the net asset value given current market circumstances, so we decided to return money back to shareholders.”
Australia’s biggest investment bank decided to shut the fund, which started in 2005, after it couldn’t find good assets in Asia or means to boost its share price, he said. Macquarie tried to add new Asia-based investments to increase the fund size and bought back shares to lift its stock value, he said.
The closed-end fund’s shares jumped 1.6 percent to 63.5 Singapore cents at the close in Singapore, extending yesterday’s 5.9 percent advance and the highest since Sept. 15, 2008. The stock is still trading at an 11 percent discount to its net asset value as of June, according to data compiled by Bloomberg.
The half-year dividend is usually paid in February and the special payout could also be made at the same time, Heng said, declining to give a specific date for the distribution.
The Macquarie fund typically buys majority or substantial interests in infrastructure businesses that allow it to gain influence or control over them.
“It’s a positive move as investors should now get the net asset value or a premium to NAV,” Sandy Mehta, chief executive officer of Value Investment Principals Ltd., said in a phone interview yesterday. “With the regular and special dividend, the payout should be between 6 cents and 8 cents.”
The asset sales could result in a payout of between 75 cents and 80 cents, he estimated. Mehta bought the Macquarie fund’s units this year, he said.
Macquarie International Infrastructure has four assets, of which Miaoli Wind, a Taiwanese wind farm, has no value on its books, according to its website. The other holdings include a 38 percent stake in Changshu Xinghua Port, a cargo port in eastern China, an 81 percent stake in Hua Nan Expressway and a 47.5 percent interest in Taiwan Broadband Communications, one of the island’s largest cable-television infrastructure owners.
“We are not looking to sell the three assets at a fire-sale price,” Heng said. “The assets are good assets, we will divest in an orderly manner to realize maximum value and don’t have a time line. We will sell when the price is right.”
The fund’s top investors include Asset Value Investors Ltd., Macquarie Infrastructure Management Asia Ltd., LIM Advisors Ltd. and Metage Capital Management, it said in a response to queries.
LIM Advisors, a $1.6 billion hedge fund based in Hong Kong, and London-based Metage Capital, had been rallying support of other stakeholders to push for changes they want to help improve shareholder return.
Macquarie International Infrastructure traded 24 percent lower than its published net asset value on Sept. 30, the two managers said in a joint letter to other shareholders on Nov. 22. The two investors also appealed for the fund’s management to hire an independent financial adviser, a proposal that was adopted by the board.
“Since the end of 2007, the fund has continually traded at an unacceptable discount to net asset value,” the portfolio managers said in their letter last month. “All shareholders are penalized for entrusting their capital to be managed in this fund” as long as the stock value of the fund continues to trade at a discount to its net asset value.
The fund, which has four independent directors and one appointed by the manager, will name an additional independent director to help with the asset sales, Heng said.
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