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DEX: Pleasant Tender Offering Results

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Author's note: This article was released arsenic portion of nan CEF Weekly Roundup connected February 15, 2023.

DEX tender connection results

Delaware Enhanced Global Dividend & Income Fund (NYSE:DEX), a world stock/fixed income closed-end fund, precocious announced the results of their tender offer. We discussed this erstwhile it was first announced successful a erstwhile CEF Weekly Roundup.

From nan property release:

PHILADELPHIA--(BUSINESS WIRE)--Today, Delaware Enhanced Global Dividend and Income Fund (the “Fund”), a New York Stock Exchange–listed closed-end money trading nether nan awesome “DEX,” announced nan last results of its tender connection for up to 3,186,291 of its communal shares (“Common Shares”), representing up to 30 percent of its issued and outstanding Common Shares, without par value. The connection expired astatine 5:00 p.m., New York City time, connected Friday, February 10, 2023. Based connected a count by Computershare Trust Company, N.A., nan depositary for nan tender offer, astir 4,212,892 Common Shares, aliases astir 39.67% of nan Fund’s Common Shares outstanding, were tendered. The Fund has accepted 3,186,291 shares (subject to accommodation for fractional shares) for rate costs astatine a value adjacent to $8.89 per share. This acquisition value is 98% of nan Fund’s nett plus worth per stock of $9.07 arsenic of nan adjacent of regular trading connected nan New York Stock Exchange connected February 13, 2023, nan pricing day stated successful nan Offer to Purchase. Under last pro-ration, 75.64% of nan Common Shares tendered will beryllium accepted for payment, taxable to accommodation for fractional shares. Following nan acquisition of nan tendered shares, nan Fund will person astir 7,434,680 Common Shares outstanding.

This was a tender connection for 30% of shares astatine 98% of NAV. As we discussed previously, specified generous tender offers are seldom willingly volunteered by CEF managers, arsenic it leads to an contiguous alteration of AUM and interest income. Instead, nan tender connection was a woody that DEX's managers made pinch activistic investors, Bulldog Investors (headed by Philip Goldstein), successful bid to push done nan merger of DEX into abrdn Global Dynamic Dividend Fund (AGD).

As we discussed previously:

Some of projected mergers betwixt Delaware's CEFs into nan abrdn CEFs had been stymied by nan deficiency of information of shareholders successful those funds. Although nan mergers had been approved by nan boards of some nan acquiring and acquired funds, shareholders from some sides request to o.k. nan merger for them to return place. In bid to get nan activists connected their broadside and push nan ballot through, nan managers of DEX and Bulldog person struck a woody to behaviour a tender connection for 30% of their shares astatine 98% NAV, that is contingent connected shareholder support of nan merger. As portion of nan deal, Bulldog has agreed to definite standstill conditions, specified arsenic voting for nan merger and besides refrain from engaging successful further activistic activity against nan fund.

It pays to salary attraction to CEF firm actions!

To return advantage of nan upcoming tender connection and piggyback connected Bulldog's efforts, we purchased a position of DEX successful our Tactical Income-100 portfolio past period astatine $8.43 erstwhile nan fund's discount was -7.44%.

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The repurchase value will beryllium 98% of nan fund's closing NAV per stock connected February 13, 2023 i.e. 98% of $9.07, aliases $8.89. This will truthful springiness america an instant profit of +5.46% connected nan tendered shares.

However, while participating successful tender offers mightiness look for illustration "free money", location is simply a important risk. That is, if much shareholders tender their shares than nan money will judge for repurchase, each shareholder will person their subscription pro-rated. The excess shares that are not accepted for repurchase by nan money will truthful beryllium returned to nan shareholders. At this point, nan shares will apt waste disconnected because nan shares are little valuable without nan tender information attached. Thus, a higher pro-ration facet is beneficial erstwhile taking portion successful tender offers.

What this efficaciously intends is that nan less nan group who cognize astir nan tender offer, nan amended nan results are for everyone else! In nan lawsuit of nan DEX tender offer, only 39.67% of shareholders tendered their shares, which was an moreover amended consequence than I expected (my guidelines lawsuit is to presume that 50% of shareholders tender). This is expected to lead to a generous pro-ration facet of 75.64%.

Thus, while nan mostly (75.64%) of our DEX shares were tendered for a summation of $0.46 per stock (+5.46%), aliases $0.50 (+5.93%) if January's distribution is included, this should beryllium balanced by nan truth that nan remaining number (24.36%) of unaccepted shares will apt spot a mini loss. As of penning (on February 15, 2023), DEX is trading astatine $8.30 truthful we are presently down -$0.13 per stock (-1.5%) connected nan unaccepted shares, aliases -$0.08 (-0.95%) if January's distribution is included. Overall, an fantabulous consequence for this trade. On nan different hand, nan 60% aliases truthful DEX shareholders who did not tender their shares simply near money connected nan table. Which, arsenic I mentioned earlier, is awesome for those who did tender. This is why it virtually pays to salary attraction to CEF firm actions specified arsenic tender offers.

As an aside, nan truth that nan shares are repurchased by nan money astatine 98% of NAV (rather than 100%) intends that location is simply a mini accretion to nan NAV/share of nan money arsenic good arsenic a consequence of nan tender offer, which is simply a bully prize to remaining shareholders. I estimate this NAV accretion to beryllium astir +0.86%.

Going forward

As we expected, aft nan tender connection expired DEX's discount quickly converged to nan discounts of nan acquiring money AGD arsenic good arsenic Delaware Investments Dividend & Income Fund (DDF), which is besides being acquired by AGD. This is because nan impending merger (slated to return spot connected March 10, 2023) will beryllium connected a NAV-for-NAV basis. Thus, immoderate important deviations successful nan premium/discount valuation of nan 3 costs could beryllium perchance exploited by purchasing nan cheapest money of nan 3 (and optionally hedged by shorting nan much costly funds).

The beneath array is from our Corporate Actions Tracker instrumentality from our members conception of nan Income Lab which updates successful real-time. As tin beryllium seen, DEX and DDF's discounts are wrong 0.21% of AGD's, truthful presently nan arbitrage opportunity is slim.

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Editor's Note: This article covers 1 aliases much microcap stocks. Please beryllium alert of nan risks associated pinch these stocks.

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Editor: Naga



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