Possible liquidation of investment fund in Chinese goods and services

9 Jan

The Greater China Fund forgeImages a deal with its major shareholders, seemingly in defiance of new managers Aberdeen Asset Management Asia.

After Aberdeen Asset Management Asia Limited acquired management responsibility of the Greater China Fund (NYSE: GCH), effective from 9 January 2013, the fund reacted by making a tender offer for up to 75% of its shares. If the number of shares put forward exceeds 75%, measures will be taken to liquidate the fund.

Under the agreement, if this tender offer succeeds in bringing forward 70% or more of shares in the fund and becomes the controlling stakeholder, after a year the largest current shareholder Investment Management Company Limited (“CLIM City of London “) will also tender its shares. During the year’s “standstill agreement,” though, it will be free to be a passive investor in the fund and purchase shares exclusively for investment purposes.

The Tender Offer is being made on the terms and subject to the conditions set forth in the Fund’s Offer to Repurchase, dated January 8, 2013, and related Letter of Transmittal, which have both been filed with the Securities and Exchange Commission.

This decision was made following what the Greater China Fund describes as a “Special Meeting of Stockholders.” It avows that if the tender offer attracts more than the 75% of shares it sets out to, “the Fund’s Board of Directors will recommend that the Fund be liquidated, and the Fund will proceed to solicit proxies from stockholders for the liquidation and dissolution of the Fund immediately thereafter.”

The offer is conditional on the percentage of stakes in the company put forward lying between 70 and 75%. Stocks will be purchased at a price per share equal to 99% of the Fund’s net asset value per share, at a market value the fund itself will set after the expiration of the tender offer.

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