The 38-year-old founder of the Value Catalyst Fund likes to take positions in funds trading at big discounts to their net asset value and then, with the backing of fellow shareholders, force a liquidation, usually at a healthy profit. His first big coup was taking on the GT Chile Growth Fund in 1996. But in late September Britain’s Takeover Panel ruled that because Kingsnorth effectively controlled more than 30 percent of his latest target, he would have to bid for all outstanding shares - something he’s scrupulously avoided doing in the past.
Kingsnorth owns just 24.5 percent of the Beta Gran Caribe fund, an obscure Dublin-listed vehicle that mainly invests in unlisted Cuban companies. But the panel said he was acting in concert with the Metage Special Emerging Markets Fund, which owns 12.5 percent of Beta. The reason: Kingsnorth had presented Metage CEO Richard Webb as a candidate for the Beta board. The panel’s decision forced Kingsnorth to offer Beta stockholders the highest price that he had paid when he accumulated shares earlier this year.
That’s why he’s warning other investors off his own bid. “It is not a good deal, since it represents a 27.9 percent discount to net asset value,” insists Kingsnorth. He wants shareholders to hold on to their shares and let his group work with the companies in the portfolio to realize their true value. “We think once people know what the profit and loss statements of these companies look like and what kind of prospects they have, the discount will shrink drastically,” says Kingsnorth. But he has this little problem: At 10 percent above Beta’s price before his bid and a 39 percent premium to what it was when he started assembling his stake, his offer really isn’t that bad.
