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Tuesday, May 13, 2008|
Is Greenmail in the Cards at Seligman?
The tight-lipped crowd at J.W. Seligman may be contending with more than the sale of the company if a published report holds true. Western Investment, a hedge fund that holds a stake in Seligman's closed-end Tri-Continental Corp., is vowing to fight to raise the value of the pool before a sale.
Western Investment's Arthur Lipson told Hedge Fund Trades that he plans to organize Tri-Continental shareholders in an attempt to narrow the larger-than-average NAV discount in the $2.2 billion closed-end fund. He is not the only activist hedger invested in the closed-ender, according to the report, which may make his task easier.
While the fight could prove an inconvenient distraction to Seligman's leaders as they solicit bids, it should not significantly change the firm's valuation. Still, the sale gives Lipson more traction than he has had in the past. Any change in control automatically terminates Tri-Continental's advisory contract. Shareholders would then have to approve a new contract with the buyer. Even if that happens, the three hedge funds hold just a little more than 11 percent of the fund's shares.
In the meantime, Lipson said he will fight to have Seligman close the fund's discount to NAV -- now a little more than 10 percent -- through either open-ending the fund or a share buyback.
Seligman offers more than 50 funds with $20 billion in aggregate assets under management. That includes more than $3 billion in high-value hedge fund assets and the $2.2 billion in Tri-Continental. It also has a niche business in offering ETF-based collective funds to 401(k) plan sponsors.
Interested buyers in Seligman include Lincoln Financial and American Express spin-off Ameriprise Financial, according to published reports. However, Lincoln Financial has itself been the target of an unsolicited takeover bid from Canada's ManuLife, according to speculation within the asset management community. ManuLife is the parent of John Hancock in the United States.
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