Virtus Total Return Fund Inc. Announces Tender Offer Program

Rhea-AI Summary

Virtus Total Return Fund Inc. (NYSE: ZTR) announces actions to enhance shareholder value, including a tender offer to acquire up to 10% of outstanding shares at 98% of NAV, potential reduction of trading discount, and additional conditional tender offers.

Insights

Financial Analyst

The announcement by Virtus Total Return Fund Inc. regarding a series of actions including a tender offer to acquire up to 10% of the Fund's outstanding shares is a strategic financial move aimed at enhancing shareholder value and addressing the discount of the Fund's trading price to its net asset value (NAV). The tender offer at 98% of NAV, net of expenses, represents an attempt to provide immediate liquidity to shareholders and potentially narrow the gap between the market price and the NAV.

From a financial perspective, this move could be indicative of the Fund's confidence in its intrinsic value and a proactive measure against market undervaluation. The conditional nature of the subsequent tender offers based on the Average Trading Discount is a mechanism to ensure ongoing efforts to manage the discount level. However, the buyback of shares at a discount to NAV could also suggest that the Fund is looking to enhance its earnings per share (EPS) by reducing the number of shares outstanding, thus potentially improving financial ratios.

Long-term implications for stakeholders include the possibility of enhanced returns due to a more favorable NAV/share ratio post-tender. However, the repurchase of shares could also deplete cash reserves, which might affect the Fund's ability to pursue other investment opportunities. Stakeholders should consider the balance between immediate liquidity benefits and the long-term strategic positioning of the Fund.

Market Research Analyst

The strategy adopted by Virtus Total Return Fund Inc. can be seen as a response to the broader market conditions where closed-end funds often trade at a discount to their NAV. The tender offer could be perceived positively by the market, as it shows the Fund's proactive approach to manage its market valuation and provide liquidity to shareholders.

Market reaction to such news typically depends on the perceived effectiveness of the buyback in reducing the NAV discount and the signal it sends about the management's outlook on the Fund’s valuation. If successful, the tender offer might lead to a temporary increase in the Fund's share price as it approaches the NAV. However, if the market perceives the tender offer as a sign of underlying issues or a lack of future growth opportunities, the impact could be neutral or even negative.

It is important to analyze the historical performance of the Fund and the sector as a whole to understand the potential effectiveness of the tender offers. The conditions attached to the additional tender offers suggest a commitment to maintaining a certain threshold for the discount, which could influence investor sentiment and the Fund's market perception over time.

HARTFORD, Conn.--(BUSINESS WIRE)-- Virtus Total Return Fund Inc. (NYSE: ZTR) (“the Fund”) today announced that its Board of Directors has approved a series of actions intended to enhance shareholder value, provide shareholders with an additional source of liquidity for their investment, and provide the potential to reduce the Fund’s trading discount to its net asset value per share (“NAV”) over time. The actions approved by the Board of Directors are:

• A tender offer (“Tender Offer”) to acquire up to 10% of the Fund’s outstanding shares in exchange for cash at a price equal to 98% of the Fund’s NAV (net of expenses related to the Tender Offer) as of the close of regular trading on the business day immediately following the day the Tender Offer expires.

- The Tender Offer will commence on April 2, 2024 and expire on May 1, 2024, unless extended. If the Fund’s shares are trading at a premium to the NAV on March 29, 2024, no Tender Offer will be conducted. Additional terms and conditions of the Tender Offer will be set forth in the Fund’s offering materials, which will be distributed to the Fund’s shareholders.

- If more than 10% of the Fund’s outstanding shares are tendered, the Fund will purchase its shares from all tendering shareholders on a pro rata basis, based on the number of tendered shares at a price equal to 98% of the fund’s NAV (net of expenses related to the Tender Offer).

• Two additional conditional tender offers:

- A first conditional tender offer for up to 10% of the Fund’s then outstanding shares at a price equal to 98% of the Fund’s NAV if the Average Trading Discount¹ of the shares is equal to or greater than 12% during the consecutive 180 calendar day period beginning 30 days after the expiration of the Tender Offer.

- A second conditional tender offer for up to 10% of the Fund’s then outstanding shares at a price equal to 98% of the Fund’s NAV if the Average Trading Discount of the shares is equal to or greater than 10% during the consecutive 180 calendar day period beginning April 1, 2025.

Further information about the Tender Offer will be announced at a later date and set forth in the Fund’s offering materials. If the provisions for a conditional tender offer are met, the Fund will provide additional information about such offers. This announcement is not a recommendation, an offer to purchase, or a solicitation of an offer to sell shares of the Fund.

¹ Average Trading Discount means the simple average of the trading discounts and premiums, if applicable, calculated using the NYSE closing market price of the Fund’s shares on each day the NYSE is open for trading.

About the Fund

Virtus Total Return Fund Inc. is a diversified closed-end fund whose investment objective is capital appreciation, with income as a secondary objective. Virtus Investment Advisers, Inc. is the investment adviser and Duff & Phelps Investment Management Co. and Newfleet Asset Management are the subadvisers to the Fund. For more information on the Fund, contact shareholder services at (866) 270-7788, by email at closedendfunds@virtus.com, or through the Closed-End Funds section of virtus.com.

Fund Risks

An investment in a fund is subject to risk, including the risk of possible loss of principal. A fund’s shares may be worth less upon their sale than what an investor paid for them. Shares of closed-end funds may trade at a premium or discount to their NAV. For more information about the Fund’s investment objective and risks, please see the Fund’s annual report. A copy of the Fund’s most recent annual report may be obtained free of charge by contacting “Shareholder Services” as set forth at the bottom of this press release.

The Fund has not commenced the Tender Offer described in this release. The Tender Offer will only be made pursuant to a tender offer statement on Schedule TO containing an offer to purchase, a related letter of transmittal and other documents filed with the SEC as exhibits to the tender offer statement on Schedule TO (collectively, the “Tender Offer Materials”), with all such documents made available on the SEC’s website at sec.gov. The Fund will also make available to shareholders, without charge, the offer to purchase, the letter of transmittal, and other necessary documents related to the Tender Offer. Shareholders should read any Tender Offer Materials carefully and, in their entirety, when and if they become available, as well as any amendments or supplements thereto, as they would contain important information about the Tender Offer.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful under the securities laws of any such state.

Investing involves risk and it is possible to lose money on any investment in the Fund.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240311520387/en/

For Further Information:

Shareholder Services

(866) 270-7788

closedendfunds@virtus.com

Source: Virtus Total Return Fund Inc.

FAQ

What actions did Virtus Total Return Fund Inc. (ZTR) announce to enhance shareholder value?

The Fund announced a tender offer to acquire up to 10% of outstanding shares at 98% of NAV, with potential reduction of trading discount and additional conditional tender offers.

When will the Tender Offer commence and expire?

The Tender Offer will commence on April 2, 2024, and expire on May 1, 2024, unless extended.

What price will be offered for the Fund's shares during the Tender Offer?

The price offered will be equal to 98% of the Fund's NAV (net of expenses related to the Tender Offer) as of the close of regular trading on the business day immediately following the day the Tender Offer expires.

How will the Fund purchase shares if more than 10% are tendered?

The Fund will purchase shares from all tendering shareholders on a pro rata basis, based on the number of tendered shares at a price equal to 98% of the Fund's NAV (net of expenses related to the Tender Offer).

What are the conditions for the first conditional tender offer?

The first conditional tender offer will occur if the Average Trading Discount of the shares is equal to or greater than 12% during the consecutive 180 calendar day period beginning 30 days after the expiration of the Tender Offer.

When will the second conditional tender offer take place?

The second conditional tender offer will occur if the Average Trading Discount of the shares is equal to or greater than 10% during the consecutive 180 calendar day period beginning April 1, 2025.