· Yesterday Elliot Associates announced that it has increased its position in Fondul Proprietatea by buying additional 26 mln shares.
· Market rumors indicate buyback acceleration
Fondul Proprietatea is a Romanian energy fund with USD 4.4 bln assets that is managed by Franklin Templeton. Elliot Associates is the largest shareholder in the fund with 15.2% stake valued over 600 mln USD. It is Elliot´s third largest equity position.
Elliot Associates is taking activist approach to this investment. They have a team of lawyers in Romanian that put pressure on Templeton to deliver a proper investment return. It worked well so far, Fondul Proprietatea is up 37% in the last 12 months. In addition to this Elliot collected 7% dividends in the period bringing total return to 44%.
Today Romanian broker Swiss Capital reported that local media mentions FP RO may sell its entire 19% stake in OMV Petrom (SNP RO) in the next few days. FP's stake in SNP RO is currently valued at USD 1.4 bln. The transaction would be the largest deal to date on the Bucharest Stock Exchange.
SNP stake represents 35% of Fondul´s NAV. If this rumor is right the FP´s cash balance would increase to 43% of NAV. This would indicate significant buyback acceleration. The shares now trade at 28% discount to NAV. At current prices FP would be able to buy around 60% of its outstanding shares, If this rumor is right, Paul Singer activism will bear the fruits. His reported transaction may indicate that something is in progress.
After the above news the shares went up by 3%. The fund still trades at 28% discount to NAV. A large buyback will narrow the NAV discount further. If this happens investors will make additional 40%. Not bad, given the fact that Paul Singer will do the work for you.
The autrhor is long FP