Magellan adds 150m securities to option purchase

The news: Shares in fund manager Magellan have surged on news it will convert closed-end securities in its global fund product. The change comes after months of tensions and a campaign from activist shareholder Keybridge Capital, which called for the fund to be wound up due to it trading at significant a discount to its asset value.

The numbers: Magellan shares (MFG) were up 4% and trading at $8.145 by 12:30pm AEDT. Magellan announced it would purchase the closed unit options (MGFO) at 10 cents per security ahead of their expiry in March 2024. MGFO shares were trading at around 2.5 cents at 3pm yesterday afternoon, before spiking to the purchase price today. The open class units (MGF) are currently trading at roughly $1.87 and were largely unaffected by today's news. The amounts involved in the funds are significant, with the open-ended class units totalling roughly $7 billion and the closed-end trust worth about $2.8 billion, according to Morningstar.

The context: Nick Bolton's Keybridge Capital had been calling on Magellan to wind up the closed-end units of the global fund, which would have allowed unitholders to cash out at the security's underlying value, rather than the trading price.

What they said: "Based on work completed to-date, we believe that a conversion to the Open Class will, on balance, allow many of the existing benefits to be retained by Closed Class unitholders, whilst at the same time, we expect to see their units in the Fund generally trade at a tight spread to net asset value going forward," Magellan Asset Management chair Robert Fraser said in a statement.