Several more suitors woo Kepit

The board of Kleinwort Benson European Privatisation Investment Trust - Kepit - yesterday invited all interested parties to put their plans for the trust in writing by 19 August, as several more fund management groups expressed an interest in the future of the large but unsuccessful trust.

Henderson Touche Remnant made a firm offer last Wednesday which would liquidate the trust, take a fee and give Kepit shareholders a choice of cash or a cheap entry to HTR's own European investment trust, Treg.

HTR claims it can offer them a premium over the price of their Kepit shares, which have been trading at a discount of up to 14 per cent to net asset value, but critics claim that the assets will be harder to sell than Treg anticipates and the value of the cash exit may be less than last week's forecast of 93.86p, and pro rata for holders of warrants.

Kepit shares now stand at 92.75p, unchanged on the day but 3p up on last week, while the warrants rose 0.5p to 28.75p.

The present fund managers, Kleinwort Benson Investment Management, believe their own counter-proposal, rushed out last Friday, to convert the investment trust into a unit trust will eliminate the discount the trust has been trading at in relation to the value of the assets it has invested in, and enable investors to obtain better value for money.

They would however still be left with Kleinwort management, and if as seems likely in the circumstances too many decided to cash in their units as soon as the unitisation process was completed, the managers could be forced to sell their best assets at poor prices, losing most of the gains from unitisation in the process.

The third and potentially most seductive option comes from Morgan Grenfell which seeks to take over management of Kepit and diversify its holdings over time to reduce the discount without being forced to sell shares at short notice at poor prices.

Morgan Grenfell has a better record than Kepit as a European fund manager but it would be obliged to pay KBIM up to pounds 4m compensation for loss of management contract. Other interested parties have not yet been named, but it is understood they are unitisers like KBIM or reformers like Morgan Grenfell rather than outright bidders.

Their proposals would therefore also incur an obligation to compensate KBIM.

Kepit will hold an extraordinary general meeting in London today to answer questions from shareholders, including an unusually large number of private investors.

The mood of shareholders is expected to be critical of the past management performance and the board of Kepit is understood to be anxious to demonstrate its independence and its commitment to shareholder rights.