23rd May 2025
On Wednesday morning, Third Point Offshore Investors (TPOU), a listed investment company offering exposure to well-known activist Dan Loeb’s master fund, announced the quite extraordinary outcome of the year-long deliberation of a specially-formed “Strategy Committee”. This Committee, formed of two new people and an existing NED of the company, have decided it is in shareholders’ best interests to turn an investment company offering access to a hedge fund, into a commercial company that specialises in reinsurance, via the reverse takeover of Malibu Reinsurance – a tiny business with just $68m of tangible book value that was formed just last year. Malibu is itself wholly-owned by another Third Point fund, with shares in TPOU being issued as consideration on a “NAV for NAV” basis.
The RNS details how the proposed all-share combination of the Company and Malibu on a NAV-for-NAV basis is expected to create a ‘fast-growing’ reinsurance operating company, with a mid-teens return on equity by the end of 2027. The Company argue that this should mean the shares re-rate given US listed life and annuity companies tend to trade at or above book value.
Given the dramatic change in strategy and related party nature of the transaction, one would usually expect the Board to offer shareholders an exit at very close to NAV. Instead, the Board are offering a tender offer of at least $75m (less than 25% of the market cap) at a discount of 12.5% to NAV.
Ironically, just over a year ago, the Company tendered for 25% of shares at a 2% discount to NAV. The underlying portfolio is sufficiently liquid (there is only a very small percentage in private assets) to offer dissenting shareholders the option of a 100% cash exit at close to NAV.
The fact that US-listed life and annuity companies trade above book value is utterly beside the point. Had the RNS said the company was going to convert to manufacturing GPUs having found a way to make them at scale for half the cost of Nvidia, I would still expect the offer of a full exit at NAV (less reasonable costs) – especially when there exists the means to facilitate this. Whether the traditional fund investors that populate the TPOU register have the analytical bandwidth or mandates to assess and hold the new entity is a pertinent question and one which the Board should have considered in formulating their recommendation.
Nothing illegal is happening here though. This is just flagrant disregard of minority shareholders and a quite unfathomable outcome of a year of work from a “Strategy Committee” that shareholders have had to pay for. In April 2024, it was flagged to us by the Board that one outcome might be a change in investment strategy – but that a cash exit would be offered alongside. Given the tender that was being conducted at that time was at NAV less 2%, we might have expected any cash exit to be on the same terms. Instead, we have a limited tender at a frankly derisory 12.5% discount. We note how the Company has received conditional commitments from new and existing investors, including Third Point, for a total of $55 million to buy shares that may be tendered by participating Shareholders. In contrast, we also note that Dan Loeb fully participated in the tender offer and sold his shares at NAV less 2% in April 2024 (admittedly this was to prevent overall percentage ownership from increasing). To add insult to injury, we learn that one of the Directors bought in last year to lead the strategic review will be the Chair of the new business.
This is all extremely disappointing. It is substandard corporate governance and sends a very clear message: TPOU – its Board and its investment manager – have no regard for the investment company sector. Since it is leaving the sector, perhaps they don’t care about the reputational damage? As shareholders in TPOU, we will be voting against this proposal. We also accept that we have been guilty of a misjudgement: we thought that a manager who supposedly fights for minority investors in their investee companies might treat their own shareholders with the same respect, and we also thought the Board might look after the interests of all shareholders.
We have learnt a lesson – minority investors can find themselves at the pointy end of shocking corporate governance if the shareholder register is too dominated by a small group of investors with conflicting interests……but we won’t let this happen without making our arguments heard. Ultimately, we operate within a shareholder democracy, and sometimes that can be abused.
Ben Conway – Head of Fund Management
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