- Biggest shareholder launches takeover
- Offer at 8% discount to NAV
- DORE has struggled to generate scale
The investment trust mergers and acquisitions (M&A) boom shows no sign of let-up with Downing Renewables & Infrastructure (DORE) the latest sub-scale fund to succumb to a take-private deal.
Shares in the solar farms-to-hydropower plants backer, popularly known by its ticker ‘DORE’, surged 22% higher to 101.5p on news the board has ‘unanimously’ recommended a £175 million cash offer from the trust’s biggest shareholder Bagnall Energy.
While the 102.6p bid price represents a 23.6% premium to the ‘DORE’s’ closing price on 19 June, it is also an 8.7% discount to the trust’s 112.4p NAV (net asset value per share as of 31 March 2025, which will disappoint some investors.
The deal is unlikely to be the last in the renewables sector, where trusts continue to languish on wide discounts to NAV owing to elevated interest rates, weaker investor sentiment and declining asset valuations.
HAS BAGNALL BAGGED A BARGAIN?
DORE’s largest shareholder with an 25.4% stake, Bagnall is a long-term private investor with a diverse portfolio of investments in renewable energy infrastructure assets.
Earlier this year, it took advantage of weakness in DORE’s share price to increase its stake in the trust.
Although DORE has returned one of the highest NAV total return rates (including dividends reinvested) in the listed renewable energy infrastructure sector over the last three years to 31 December 2024, its wide and persistent discount to NAV over the past year has prevented the fund from growing by issuing new shares, and deterred buyers in the secondary market.
As James Watson, Bagnall’s chair, said: ‘We are firm believers in the transformative power of renewable energy infrastructure, and the acquisition of DORE aligns perfectly with Bagnall’s long-term vision and commitment to the sector. However, given challenging public market conditions and DORE’s current lack of scale, we believe that the acquisition will enable it to achieve greater scale, success and operational efficiency.’
Watson added: ‘For too long, DORE’s true value has not been reflected in its share price, and today’s offer represents an attractive opportunity for DORE shareholders to immediately crystallise value.’
BID WAS ON THE CARDS
‘Whilst it would have been nice to see a bid at close to NAV as was the case for BBGI Infrastructure (BBGI),’ commented Stifel, ‘we think for the renewables funds that hope is probably optimistic, especially with the sector having traded on a circa 30% to 35% discount in recent months.’
Stifel explained: ‘The renewables sector has a number of risk factors that have been demonstrated in recent years such as power price volatility, high debt, end of subsidy lifes, discount rate volatility and volatile generation and dividend cover. With Bagnall owning 25.4% of the shares and further support from 22.5%, we think it will be difficult for another bidder to offer a higher price and get Bagnall on board.’
Panmure Liberum observed that the takeover has been on the cards for some time, with DORE’s long-duration, inflation-linked hydro portfolio in particular fitting the profile that has driven M&A takeouts like Atrato Onsite Energy and BBGI.
‘Based on its returns from launch and the evergreen nature of the hydro portfolio, there is an argument to be made that DORE has been the best operational portfolio in renewable funds over the past two years,’ said the broker.
‘On a three-year view, it ranks number one in NAV total return and number two in share price total return, within renewables. On this basis, it is a shame that it is likely to be lost to private, and the pricing implies a good deal for Bagnall. The issue for DORE has been scale.’
