In a stock exchange notice today (25 January), the directors said the programme will be funded by using a portion of the €34.6m of proceeds realised from the most recent sale of APEO’s direct co-investment in Action.
The trust has the power to buy back up to 8,056,569 shares, in accordance with shareholder approval at the annual general meeting in March 2023. As the share buyback authority expires in March, a similar authority will be requested at the upcoming AGM.
abrdn to sell European private equity business for £100m
The board noted that, like many of its peers, APEO’s share price has diverged materially from its net asset value in the last 18 months, resulting in a discount much steeper than the long-term average.
According to the Association of Investment Companies, APEO is currently trading at a 38.7% discount. During its 22-year history, the recent discount to NAV has only been wider during the Global Financial Crisis and the onset of the pandemic, the board noted.
The directors said that while the current share price presents an “exceptional investment opportunity”, any decision to buy back shares “must always be balanced” against other considerations, such as balance sheet position, level of outstanding commitments and cashflow forecasts.
Additionally, the board emphasised the need to take into account longer-term factors, such as increasing APEO’s exposure to direct co-investment, which typically require full cash funding upfront, and the trust’s relatively concentrated shareholder base.
abrdn completes sale of $4bn US private equity and venture capital business to alternatives boutique
“The ability to recycle a significant portion of the Action proceeds, realised at 100% of its 30 June 2023 valuation, into buying APEO shares at a significant discount to NAV, is a compelling use of the company’s capital at this time and provides immediate NAV accretion to APEO’s shareholders,” the board said.
“It also highlights in the clearest terms the disconnect between APEO’s current share price and the valuation of its underlying portfolio.”
The board said it will consider expanding the programme if substantial distributions from the portfolio take place. It also highlighted that since 2016, the trust has consistently provided shareholders with an increased quarterly dividend, effectively serving as a regular return of capital at NAV.
“For the avoidance of doubt, the board intends to continue this policy going forward, with the aim of maintaining the value of the dividend in line with inflation,” it added.
