Apax Global Alpha launches ‘flexible’ capital allocation framework and kicks off buyback

Investment trust Apax Global Alpha (AGA) has unveiled a new capital allocation framework and kicked off a share buyback programme to take advantage of “wide discounts.” It also announced the retirement of its long-serving chair.

The FTSE 250 firm said on Wednesday that it had completed a review of its policy and made changes to reflect feedback from investors representing the majority of its share capital – who suggested they wanted buybacks added to the company’s “capital allocation toolkit.”

Among the measures, AGA will create a “distribution pool” to earmark funds on AGA’s balance sheet available for buybacks, which it said would allow the board to capitalise on the firm’s current discount to net asset value (NAV).

AGA said it intended to allocate 100 per cent of excess cash flow to the pool each year until its size reaches five per cent of the firm’s NAV. It added that the board had chosen to seed the pool with €30m (£25.3m), with a buyback programme to commence immediately.

The firm said it would continue to pay regular dividends twice a year, to be set at an absolute level of 11p per share each year to give “certainty of income”.

This level currently represents a dividend yield of around seven per cent, and AGA said its board may also consider awarding a special dividend as part of the capital allocation framework.

Karl Sternberg, AGA’s incoming chair, said: “The board believes that AGA’s current discount to NAV presents an attractive opportunity for AGA to create immediate value for shareholders by investing in the company’s own shares.”

“AGA’s new, flexible framework gives the board the tools it needs to allocate capital as effectively as possible for the benefit of shareholders whilst also ensuring the company continues to grow over time through investments in AGA’s private equity portfolio,” he continued.

Sternberg is due to replace Tim Breedon, who AGA said in a separate announcement on Wednesday would retire on 1 July after nine years in the role since its IPO in 2015.

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