The Cayzer family has asked shareholders to waive the requirement for it to make a bid for Caledonia Investments (CLDN ) when its stake surpasses 50% so that the board can continue share buybacks to narrow the discount. 

Investors in the £3bn self-managed multi-asset global trust will be asked to approve a ‘rule nine waiver’ at the December general meeting, which would mean the Cayzer family would not have to bid for the trust when its 49.5% stake inevitably increases beyond 50% as shares are bought back. 

Shareholders have voted to waive rule nine at each annual general meeting since 2010, allowing the board to continue buying back shares and shrinking the overall pot.

However, last year, 35% of voting shareholders voted against the waiver, in line with the proxy voting adviser’s recommendation. At another vote in July this year, that figure fell to 5%, a stock exchange notice shows.

Over the six months to the end of September, the trust allocated £26.3m to share buybacks, with 746,963 shares repurchased at an average discount of 34.8%. Despite the ongoing buybacks, Caledonia shares still trade at a hefty discount of nearly 40% as investors remain wary of the Cayzer family’s large stake in the trust.

Mat Masters, chief executive of the trust, said the share price continued to ‘undervalue the high quality and diverse portfolio, our long-term track record and future prospects’.

‘The proposals announced… provide optionality for Caledonia to continue to buy back shares, further enhancing value for our shareholders,’ he said.

Foreign exchange headwind

Interim results to the end of September show an underlying total return of 0.5% in sterling terms, as performance was impacted by currency headwinds to the tune of £104m.

However, Masters said the overall portfolio performed well, particularly the listed companies that make up 35% of net assets, which delivered returns of 7%, while the board paid a final dividend of 51.47p per share, marking the 57th consecutive year of income growth.

Top performers included Chinese e-commerce giant Alibaba, thanks to strategic change brought about by a new chief executive, US cloud computing group Oracle and tobacco behemoth Philip Morris.

Masters added Pool Corp, a US distributor of swimming pools and outdoor living products, to the fund and exited a position in British American Tobacco (BATS).

Strong performance in income was led by Philip Morris and Unilever (ULVR), with the latter benefiting from ‘early traction in its growth action plan, with increased investment in its top 30 brands, continued portfolio optimisation and the benefits of a new organisational structure and reward framework’, said Masters.

The CEO purchased two new stocks for income: accounting software group Sage (SGE) and chemical company Croda (CRDA).

He exited DS Smith (SMDS) after its takeover by International Paper, as well as water utility stock Pennon (PNN).

The portfolio of private companies, which constitute 29% of net assets, detracted 2.8% from performance as generally good performance was offset by a reduction in the value of the position in Cooke Optics, which manufactures cinematography lenses.

The company continues to be impacted by the Hollywood writers’ and actors’ strikes despite good demand for its new ranges. Masters is expecting a slower recovery, with the company’s valuation slashed by 56% to £50.4m.

Masters made £64.2m of investments into private companies during the period, the vast majority of which – £55m – was invested into Direct Tyre Management in August. 

The fund acquired Direct Tyre, which provides tyre management to fleet operators, on the strength of its ongoing growth, ‘enabled by a proprietary technology platform, which allows customers to maximise their fleet efficiency, compliance and output’.

He said the group has ‘consistently delivered year-on-year growth with a revenue compound annual growth rate of 16% over the last 15 years’.

The trust is also invested in a portfolio of funds operating in North America and Asia with a bias to buyouts, which make up 30% of assets. While generating a positive return in local currencies, exchange rates meant the portfolio detracted 2.4% from overall performance.