Clemente Fund Under Siege Again : Grace-Pickens Takes Second Bid in 4 Months to Holders
An investor group, including Thomas B. Pickens III, John S. Grace and Oliver R. Grace Jr., Tuesday launched its second attempt in four months to take over Clemente Global Growth Fund by taking its pitch directly to the fund’s shareholders.
Clemente is a closed-end mutual fund that specializes in equity securities in small and medium-sized companies in emerging markets around the world. Its founder, Lilia C. Clemente, was one of the first money managers to move aggressively into global stocks and markets.
Grace-Pickens Global Acquisitions Partners began a tender offer to acquire 4.8 million shares of Clemente Global--81.1% of the outstanding shares--for $38 million, or $7.97 a share. The price is based on 92% of the fund’s net asset value, which was $8.66 a share as of Dec. 29 on the New York Stock Exchange. Clemente closed Tuesday at $7.375, unchanged from Friday’s close.
Refused in September
Grace-Pickens, through various partnerships, already owns 18.9% of the 5.9 million shares outstanding of Clemente.
In September, Clemente’s board rejected an offer by the Grace-Pickens group to acquire the fund’s portfolio of securities for 92 cents on the dollar. Clemente’s net asset value then was $8.29 a share, which made the offer worth about $37.4 million.
“They were trying to buy the assets, not the shares,” explained President Leopoldo M. Clemente Jr. “Now they are trying to buy shares of the fund. . . . The first time the proposal was made to the board of directors. This time it is made to the shareholders.”
The Clemente board urged shareholders to refrain from making a decision until it meets next week to evaluate the offer. About 30% of the stock is held by clients of Sanyo Securities, a Japanese firm. The rest is held by American and European investors, according to Clemente. Lilia C. Clemente, a widely respected money manager, launched the fund June 23, 1987.
What made the fund so vulnerable was the steep 25% discount-to-net asset value at which it was selling early in 1988. That has since narrowed to 14.84%. Closed-end mutual funds like Clemente’s issue a fixed number of shares that trade at a premium or discount to their net asset value. Widespread discounts have made closed-end funds recent targets of takeovers.
Pickens, youngest son of T. Boone Pickens Jr., and the Grace brothers, distant cousins of W. R. Grace & Co. Chairman J. Peter Grace, have made hefty profits by buying into closed-end mutual funds and forcing them to convert to open-end status. They earned $10 million when the $700-million Japan Fund became an open-end fund. The Graces were part of an investment group that forced the liquidation of the $200-million Crescent Japan Investment Trust PLC, a British closed-end fund.