Closed-end fund issues GDRs as activist investor creates ‘unusual’ conditions
Romania’s $3.2 bn Fondul Proprietatea, the world’s fifth-largest closed-end fund, has launched a secondary listing on the specialist fund market of the London Stock Exchange (LSE) in what industry watchers say will be a test of both Elliott Advisors, the fund’s biggest shareholder, and fund manager Franklin Templeton Investments.
The fund, created in 2005 as a pool of state-owned companies to compensate Romanians for assets confiscated under communism, listed through global depositary receipts (GDRs). The listing aims to increase Romania’s exposure to foreign investors, strengthen the country’s capital markets and prepare for a series of future listings, including of Hidroelectrica, the state-controlled power producer partly owned by the fund.
‘The secondary listing of the fund on the LSE will increase the visibility of the Romanian capital market on the international scene, facilitate access of a broader base of foreign investors to the country, and act as a catalyst toward unveiling Romania’s many other investment opportunities,’ says Mark Mobius, executive chairman of Templeton Emerging Markets Group, in a press release.
‘We have witnessed a huge interest for Romanian companies during our numerous roadshows to raise awareness of the fund abroad and we are confident the fund’s listing on the LSE will increase the appetite of investors for Romanian equities.’
The listing of Fondul Proprietatea will also highlight the role played by Elliott Advisors, which has a 19.7 percent stake in the fund, as the activist investor seeks three seats on the board of Alliance Trust, the Financial Times reports.
Franklin Templeton and Elliott Advisors reached an ‘unusual’ agreement in September that allows Franklin Templeton to receive extra remuneration for distributing cash to shareholders, the newspaper reports. The FT, without citing sources, also notes that Elliot has said it would support an extension of Templeton’s management contract only if it sharply reduced Fondul Proprietatea’s discount to net asset value.
