A FTSE 250 dividend stock — probably my favourite one recently — spiked 17% today (6 February). It was investment trust BBGI Global Infrastructure (LSE: BBGI).
Surprisingly, this wasn’t enough to top the mid-cap index gainers, as iron ore pellet producer Ferrexpo surged 21% higher.
Normally I’d be delighted to see this type of one-day rise from a stock in my portfolio. And I’m certainly not complaining, especially as it had been drifting somewhat aimlessly over the past year. Yet, it’s still bittersweet…
What happened
BBGI has agreed to be acquired by Canadian pension fund manager British Columbia Investment Management for £1.06bn.
Under the terms of this proposed all-cash deal, BBGI shareholders like myself will receive 147.5p per share. This is a premium of 21.1% to the closing share price yesterday, and 20.1% more than the previous three-month average.
On the offer, CEO Duncan Ball said: “Since its launch in 2011, BBGI has grown to become one of the UK’s largest listed infrastructure funds, with a globally-diversified portfolio of 56 low-risk, core infrastructure assets that deliver sustainable and long-term index-linked cash flows. Over this period, we have delivered a total net asset value [NAV] return of 176.3%.”
The actual return has been less, mind, as the trust has been trading at a double-digit discount to NAV. Indeed, just last week (31 January), I wrote: “I think [BBGI] shares look very attractive at 121p.This leaves them 18.4% below the portfolio’s net asset value (NAV) of 148p, as at 30 June.”
I ended with: “If and when interest rates move lower, I think the share price could recover strongly as investors reassess the high-quality income on offer.”
It appears the fund isn’t waiting about to find out — the share price might not have bounced back — and the board is recommending shareholders vote through the deal.
Why am I sad?
For me, it’ll bring this investment firmly back into positive territory. Indeed, when I factor in the dividends I have received, the total return will be around 10% since I invested just under a year ago.
Not bad, but I was expecting a lot more over time. BBGI’s portfolio is made up of high-quality projects like healthcare facilities, tunnels, and toll bridges. The sort of things that aren’t going anywhere and tend to throw off reliable cash to fund dividends.
The forward dividend yield had crept above 7%, while management was recently boasting that BBGI had another 15 years of dividend growth left in the tank from its existing portfolio. Hey ho.
What will I do?
BBGI plans to declare an interim dividend before the deal is completed. If I take that, the offer price will be reduced by the dividend amount. The current share price of 143p largely reflects this.
I won’t be hanging around now, though. I’ll sell up and move on.
Lots of value around
This is the second business in my portfolio in the last couple of months to be acquired at a significant premium. Small-cap AI firm Windward rocketed 70% higher in the days leading up to Christmas.
What this proves is that there is still a lot of unrealised value about today in cheap UK stocks. I expect a lot more shareholder value to be unlocked across the FTSE 350 this year.
