Following the offer for BBGI Global Infrastructure SA (LSE:BBGI) from a Canadian pension fund last week, investors will be wondering which of the other highly discounted investment trusts in the infrastructure and renewables sector might be next to attract a buyer.
The £1.6 billion all-cash offer from BCI for the infrastructure fund was at a premium of 21% to the last closing price before the announcement.
This deal "highlights the 'value' sitting in many of these portfolios", said Stifel analyst Iain Scouller, with many of the investment companies shares languishing on 20% to 30% discounts to their net asset value of late.
Key issues for bidders assessing whether to bid, he said, are the make-up of a trust's shareholder base, its portfolio mix, debt structure and management termination terms.
Whilst most funds in the Infra have simple debt structures at the listed company level, some have long management contracts, and while most Renewables have short management contracts, they have complex debt structures.
Acknowledging that it is a "mug's game" to rank the probability of funds going private, given the range of motives for bidders, Scouller said: "We think smaller funds may take the view they will be unable to grow [through] equity issuance for the foreseeable future and going private may offer scope for growth - one of BBGI's rationales for delisting."
This category includes Pantheon Infrastructure PLC (LSE:PINT), Foresight Environmental Infrastructure (LSE:FGEN), Octopus Renewables Infrastructure Trust PLC (LSE:ORIT) and Downing Renewables & Infrastructure Trust PLC (LSE:DORE).
On the other hand, large portfolios of operational assets "may be attractive to pension funds or corporates seeking 'ready-made' cash generative assets".
He put HICL Infrastructure Company Limited (LSE:HICL), International Public Partnerships Ltd (LSE:INPP), The Renewables Infrastructure Group Limited (LSE:TRIG), Greencoat UK Wind PLC (LSE:UKW) and Greencoat Renewables PLC (LSE:GRP) in this category.
However, INPP has a five-year and HICL a three-year termination compensation, "which will influence the price any bidder is willing to pay".
"Issues which we think bidders will be wary of include shareholder bases such as at 3i Infra, with 3i Group owning one-third of the shares. NextEnergy, Foresight Solar and Bluefield have complex debt structures which bidders may be cautious of. Sequoia & GCP have relatively short-dated loans, therefore these debt portfolios may be of less interest to bidders than the cashflows generated by the long-dated projects in other Infra funds."