Back in April and June of this year, I posted that the DWS Dreman Value Income Edge Fund (DHG) had become a target of several closed-end fund activists. The activists, led by Art Lipson of Western Investment, have been successful in convincing the DWS board to take the following actions:
- Approved a change to DHG’s investment objective and strategy to reflect an increased emphasis on achieving a higher yield. There will be a shift away from DHG’s current approach of income plus an equity hedge strategy to a pure high-yield strategy. This action will reposition the fund into a category that traditionally trades at premiums or low discounts to NAV.
- DHG will conduct an issuer self-tender offer to purchase up to 25% of its outstanding common shares for cash at a price per share equal to 99% of its NAV.
- DHG will purchase its own shares on the open market from December 1, 2010 until May 31, 2011 whenever the fund’s common shares are trading at a discount to NAV in excess of 5%, up to a maximum of 2% of its total outstanding shares per month. This enhanced repurchase program is in addition to the previously announced program where DHG was permitted to purchase up to 5% of its shares from December 1, 2010 thru November 30, 2011.
- DHG will change its name to “DWS High Income Opportunities Fund, Inc.”.
- The Board voted to terminate DHG’s Sub-Advisory Agreement with Dreman Value Management LLC and has agreed to transition portfolio management to the fund’s investment advisor, Deutsche Investment Management Americas Inc. High Yield group lead by Gary Russell.
DHG jumped 6.5% on the news yesterday, but is still selling at a 5.5% discount to NAV. I plan to hold on to my shares at least until the tender offer which begins later this month.
Full disclosure: Long DHG.