Restructure Risks Loom as Platinum Asia Investments Seeks Shareholder Approval

Background and Rationale

Platinum Asia Investments Limited (ASX, PAI) has unveiled a significant corporate restructure designed to address a long-standing issue, the persistent discount at which its shares have traded relative to their net tangible asset value (NTA). The proposed solution is a scheme of arrangement whereby shareholders will exchange their existing PAI shares for units in the Platinum Asia Fund Complex ETF (ASX, PAXX), a quoted managed fund that trades closer to its net asset value (NAV).

This move reflects a strategic shift from a closed-ended listed investment company (LIC) structure to an open-ended ETF structure, which typically offers greater liquidity and price transparency. The restructure is expected to benefit shareholders by enabling trading at prices more closely aligned with underlying asset values, enhanced market liquidity, and a reduction in management expense ratio.

Scheme Details and Approvals

The scheme is to be implemented under Part 5.1 of the Corporations Act, subject to customary conditions including shareholder approval and Federal Court sanction. A Scheme Meeting is scheduled for 12 August 2025, with the implementation date targeted for 25 August 2025. If approved and implemented, PAI will be delisted from the ASX, and its investment portfolio will be transferred to the underlying Platinum Asia Fund, managed by Platinum Investment Management Limited.

Shareholders will receive new fully paid units in PAXX as consideration, with the number of units determined by a formula based on the post-tax NTA of PAI relative to the NAV of PAXX at a valuation date immediately prior to implementation. This ensures that shareholders receive value closely aligned with the underlying assets.

Independent Expert and Director Recommendations

BDO Corporate Finance Australia Pty Ltd, the independent expert appointed to assess the scheme, has concluded that the proposal is both fair and reasonable, and therefore in the best interests of PAI shareholders, provided no superior proposal emerges. This conclusion is supported by a detailed valuation analysis comparing the fair market value of PAI shares pre-scheme to the value of the scheme consideration.

The independent directors of PAI, Margaret Towers and Ian Hunter, have unanimously recommended that shareholders vote in favor of the scheme, subject to the independent expert maintaining its positive opinion. Their recommendation underscores the board’s view that the restructure offers a practical and cost-effective solution to the discount issue, while preserving shareholder exposure to Platinum’s Asia ex-Japan equity investment strategy.

Special Dividend and Tax Considerations

In addition to the scheme consideration, the board currently intends to pay a partly franked special dividend to shareholders, equal to the company’s retained earnings as at the valuation date, adjusted for restructure-related costs. The final decision on the dividend will be made prior to the scheme meeting and is subject to various conditions including the scheme becoming effective.

Shareholders should be aware that the scheme will trigger a capital gains tax event, with no rollover relief available. The special dividend will be franked to the maximum extent possible but is not expected to be fully franked. Tax implications will vary depending on individual circumstances, and shareholders are advised to seek professional advice.

Risks and Uncertainties

While the scheme offers clear benefits, it is not without risks. Market fluctuations between the valuation date and implementation could affect the final scheme consideration. Additionally, shareholders outside Australia and New Zealand may be treated as ineligible and will receive cash proceeds from the sale of units issued on their behalf, which may differ from the NAV.

Another notable uncertainty is the potential merger of Platinum Asset Management Limited, the ultimate owner of the investment manager Platinum Investment Management Limited. This transaction, if completed, would result in a change of control and could impact key personnel and investment activities.

Next Steps

Shareholders are encouraged to carefully review the scheme booklet, including the independent expert’s report, and to participate in the scheme meeting either in person or virtually. The outcome of the shareholder vote and subsequent court approval will determine whether the restructure proceeds as planned.