Filinvest Land’s crazy tender offer buyback using FILRTbux

Filinvest Land [FLI 0.83, up 22.1%; 908% avgVol] [link] announced a creative plan to conduct a capped voluntary tender offer for its own FLI shares where payment is settled in Filinvest REIT [FILRT 3.11, up 1.6%; 93% avgVol] shares. Tendering FLI shareholders will receive 32 FILRT shares for every 100 FLI shares tendered (0.32:1 ratio). The total number of shares that FLI will accept through the tender offer is capped at 1,866,000,000, or 7.69% of FLI’s outstanding shares.

> What’s going on here?  It’s an FLI buyback.

It’s a crowd-sourced FILRT block sale. It’s both of those things at the same time. At the end of the day, FLI is offering its shareholders the chance to redeem their FLI shares for FILRT shares.

It’s really that simple. A buyback will pump the value of FLI’s shares, and a block sale will get more FILRT shares into public hands to make room for any future property-for-share swaps.

> But why a tender offer?  Doing this by tender offer, as opposed to just a traditional buyback, allows FLI to get a massive batch of shares off the open market all at once at a set price. It would take FLI more than a year of FLI’s average volume to buy up all those shares organically off the market, and that sustained manic buying would definitely drive FLI’s price up and would most likely make doing on the open market more expensive. 

> Why is the tender offer capped?  Capping the tender offer further controls the cost for FLI.

They’re basically saying: “Anyone can sell us their FLI shares in this deal, but we’re only going to buy a maximum of 7.69% of the company back.” The market might have been confused by an uncapped tender offer, as that would send confusing signals. By capping the tender offer, FLI frames this as a combo play FLI buyback and FILRT block sale.

> Why pay with FILRT shares?  Kills two birds with one stone. FLI gets to put 600 million FILRT shares into public hands, which will increase FILRT’s public float from 34.48% to 46.75%, and it gets to take 7.69% of FLI’s outstanding shares out of circulation in a cashless, one-time transaction.