Monash Absolute Investment Co. Ltd. raised "a number of serious concerns" about Sandon Capital Investments Ltd.'s merger proposal but said its board of directors will meet with Sandon Capital to discuss the benefits of the proposal to its shareholders.

Monash said Oct. 12 that several issues need to be discussed, including Sandon Capital's overestimation of the degree of cost savings to the proposal and the two companies' different investment approaches. Further, Sandon Capital overestimates the uplift to Monash shareholders that would potentially accept Sandon Capital's scrip, the company noted.

Sandon Capital underestimated its level of fees, which are overall much higher than Monash, as it charges investment performance fees, Monash added. The company's response came after Sandon Capital on Oct. 8 made a nonbinding, indicative offer to Monash for a possible merger.

If the proposal proceeds, the merged entity could have post-tax net assets of approximately A$70 million and reduced management expense ratio, Sandon Capital said. Under the proposal, eligible Monash shareholders would receive 982 new Sandon Capital shares for each 1000 Monash shares held. Sandon Capital will issue up to 43.5 million shares. Assuming a 50% scrip election, current Monash shareholders would own about 32% of the combined entity on a diluted basis.