A Neil Woodford Small Cap Wows
LONDON -- City super-investor Neil Woodford will be smiling today. One of his small-cap bets has just come up trumps.
Woodford bought into AIM-listed biopharmaceutical firm Proximagen (ISE: PRX.L) three years ago in a placing at 140 pence per share. And I hope a few Fools took note when I highlighted the company at 87 pence in 2010!
Today, it was announced that U.S. drugmaker Upsher-Smith Laboratories is to buy Proximagen for 320 pence per share in cash, with up to a further 192 pence in either cash or loan notes by way of a contingent value right, which is linked to the future success of two of Proximagen's drugs.
The deal looks to be all but in the bag. Proximagen's directors have recommended the offer and are supported by the holders of 72% of the company's shares, including Woodford's Invesco Perpetual Income and High Income funds and Lansdowne Partners, the hedge fund manager that reportedly made 200 million pounds betting on the credit-crunch share-price collapses of Barclays and Northern Rock.
As I write, Proximagen's shares are trading at 332 pence, up just more than 20% on yesterday's close and at a small premium to Upsher-Smith's 320 pence bid. Given the potential of a further 192 pence of value for shareholders, the current share price implies the market either sees only modest value in the CVR or doesn't have enough information to assess the likely value.
Be that as it may, I'm sure investors who participated in Proximagen's placing at 140 pence per share, along with any lucky Fools who snapped up shares at 87 pence two summers ago (not me, sadly!), will be more than happy with a 320 pence-per-share return. Anything up to 192 pence on top of that will simply be icing on the cake.
Neil Woodford seems to be winning on his Proximagen bet, and it's the first of three small-cap "buy what Woodford bought but cheaper" opportunities I've highlighted for you over the last couple of years.
Don't forget, though, that Woodford is best-known for making big bets on great blue-chip dividend shares. If you want to know where he's been investing serious money, get yourself a sight of the Motley Fool report "8 Shares Held By Britain's Super Investor" -- it's free to download right now.
Further investment opportunities:
At the time this article was published G A Chester does not own shares in any of the companies mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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