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LONDON (Alliance News) - Gabelli Merger Plus Trust PLC on Wednesday said its net asset value declined somewhat in its first half, but remained enthusiastic about opportunities that lie ahead.
In addition, Gabelli's performance was also hindered following US chipmaker Qualcomm Inc's failed acquisition of NXP Semiconductors NV.
The merger arbitrage investor's net asset value per share on December 31 was USD9.67, a 3.2% drop from USD9.99 per share the year before. In merger arbitrage, a company buys stock in a company that is due to be acquired or otherwise reorganised and earns the differential between the market price and the realisation of its shares through the deal's completion.
"While global markets continued their rally throughout the third quarter, September marked the peak, and the year ended with one of the worst Decembers on record. All major asset classes retreated in the month, capping off a year headlined by the return of volatility," Gabelli Funds said.
The company said it is enthusiastic about opportunities to increase client wealth and highlighted that increased market volatility alongside a more normalised interest rate environment, should provide attractive merger spread opportunities. Gabelli also thinks corporate merger activity should remain robust given the successful passage of US corporate tax reform.
Gabelli bought a stake in NXP Semiconductors in advance of its planned acquisition by Qualcomm. Last year, Qualcomm walked away from a USD44 billion deal to buy NXP Semiconductors after failing to obtain Chinese regulatory approval.
Gabelli Merger Plus said: "The deal was both strategically and financially compelling for Qualcomm, and we expected the beneficial commitments made by Qualcomm to China should have incentivised Chinese regulators to approve the deal before the deadline. While the outcome was disappointing for us, our diversified approach to portfolio construction seeks to minimise adverse impacts from deal terminations."
The company paid dividends totalling USD0.24 per share during the six month period, up from nothing for the same period the year before.
Gabelli Funds LLC, the company's investment manager, said: "While there is no shortage of macro risks in the market, we continue to expect that corporate confidence, robust balance sheets, and repatriation of foreign cash will act as a driver of corporate merger activity in the near term, as companies use [mergers and acquisitions] as a means to stimulate growth."
Gabelli Funds added: "We continue to find attractive opportunities investing in announced mergers, and we expect that future deal activity will provide further prospects to generate returns uncorrelated to the market."
Shares in Gabelli Merger Plus closed untraded at USD8.55 on Wednesday.