Daniel Loeb's Third Point Investors Transforms into Insurance Holding Company

By Svea Herbst-Bayliss

NEW YORK (Reuters) -Billionaire investor Daniel Loeb is transforming his London-listed investment company into an insurance holding company following years of criticism about its valuation discount to his New York-based hedge fund Third Point.

Third Point Investors Limited (TPIL), which listed on the London Stock Exchange in 2007, said on Wednesday that it will acquire Malibu Life Reinsurance SPC, a life annuity reinsurer which Loeb launched last year.

The stock-for-stock deal will be voted on by shareholders, likely in the third quarter. Given Loeb's high ownership stake, it is likely to be approved.

TPIL is considering a tender offer that would allow investors to get a better price for their shares than on the open market.

Boaz Weinstein, a TPIL shareholder and prominent U.S. activist investor who has taken aim at closed-end funds' discounts, on Wednesday signaled support for the Third Point plans.

"We're pleased to see a board of directors responding to the inherent challenges within the UK investment trust market," Weinstein said.

"We believe this transaction creates a clear path to value creation and plan to support it."

Like other UK-listed investment companies, TPIL is known as a feeder fund and was originally designed to give retail shareholders a taste of hedge funds that had long been off limits to all but the wealthiest and largest financiers.

TPIL, which has roughly $500 million invested in Third Point's flagship Offshore hedge fund, will invest principally in Third Point's various credit strategies.

By the end of 2027, the new reinsurance operating company expects to deliver mid-teens returns, the company said.

Last year TPIL gained 25.5% after fees. This year it is roughly flat.

The merger is designed to end years of complaints about a persistent gap between where the fund's shares trade and their underlying net asset value.

Criticism about the double-digit discount even turned Loeb, who has waged activist campaigns at companies including Nestle, Walt Disney and Campbell's, into a target for other activist investors.

Four years ago TPIL shareholder Asset Value Investors took public aim at the discount, and TPIL took steps, including share buybacks, to address it.

But the discount, which persists at many such companies, continues to annoy certain investors.

Earlier this year, U.S.-based Weinstein, who waged war against certain BlackRock investment products, turned his attention to the UK where he targeted several local investment trusts with the aim of overhauling their boards.

Last year, without direct pressure from outsiders, TPIL appointed two independent directors - activist investors Dimitri Goulandris and Liad Meidar - to its board to lead a months-long strategy review, which led to this move.

The board, which is independent of Loeb and Third Point, earlier this week unanimously approved the planned transaction.

TPIL will own an interest in the Third Point hedge fund and in Malibu after the transaction is finalized.

It said it would likely meet Malibu's ongoing capital needs by periodically redeeming capital from the hedge fund. Ultimately, TPIL will become a pure-play operating company within the next 18 to 36 months.

Late last year, Third Point purchased hedge fund manager AS Birch Grove to help build out its credit platform.

Third Point's move echoes recent steps by other investors. Pershing Square Capital Management's Bill Ackman earlier this month took a listed real estate development company, in which he already owned a stake, and transformed it into a diversified holding company that will buy stakes in other companies.

(Reporting by Svea Herbst-Bayliss; Editing by Leslie Adler and Jan Harvey)