Former investment manager may be buying up Arc Capital Holdings says board

The £47m Arc Capital Holdings investment trust may be the target of a hostile takeover by its former investment manager, the fund’s board says.

Arc Capital Holdings’ price has leapt from 19 cents to 28c from 13 November to 10 December.

That made it November’s top-performing investment trust on a price basis, according to QuotedData research.

The Cayman Island-domiciled fund was launched on Aim in June 2006, it has been winding down since January 2012.

Its former manager Arc Capital Partners resigned from control of the trust in August after tensions between the board and the company reached an impasse.

The conflict stemmed from a failed Chinese equity purchase from 2010 that cost the company money. The board is suing Arc Capital Partners for damages totalling RMB480m (£49.6m) over the incident.

However, in a recent note to the exchange, the trust’s board says it believes the former investment manager may be behind a recent flurry of trading and price spike.

“The board notes the recent price movement and unusually high trading volume in ARCH shares,” the trust says.

“Whilst the company has not received any formal notification as to the identity of the new controller of a significant number of ARCH shares, the board understands that there are rumours that some or all of the larger purchases are connected to the former investment manager to the company: ARC Capital Partners Limited, or entities related to it or the PAG group.”

At the trust’s AGM today, the board passed a resolution to force shareholders to declare their holdings. It has also passed a rule that would compel any shareholder with a more than 30 per cent of the shares to make an offer for the rest.

The board had been concerned that the shares had been bought to prevent those resolutions.

QuotedData research director James Carthew says ARC Capital Holdings has “been through the wars” and is yet to see the other side.

“What looked like a very interesting company some years ago is now tainted by infighting between the board and the former manager,” he adds.

The board’s suspicions about the manager buying up the stock may be false, he says.

“There may of course be no substance to these rumours but it scarcely seems credible to me that the former manager would have the cheek to buy up stock to force through shareholder motions to its advantage.

“If the rumour were true, I’m not sure I’d want to be a holder of any other fund managed by the same team. But it seems unlikely as the shareholder resolutions were passed.”