The boards of the Threadneedle UK Select Trust (UKT) and Henderson High Income (HHI) Trust have outlined proposals to merge the two investment companies.
In a statement the board of UKT revealed that ahead of a continuation vote at the next annual general meeting the board had been reviewing options to grow the company to “a credible and sustainable size and to reduce the discount at which the company's shares have traded”.
It said the board had concluded the trust was not able to continue in its current form and had undertaken a review of potential merger candidates, which had led to the recommendation of a merger with HHI.
The planned terms of the merger would see a reconstruction and winding up of the Threadneedle UK Select Trust, with shareholders being offered the opportunity to exit their investment for cash at close to net asset value or rolling over into HHI.
The UKT board added Henderson would be making a “significant contribution” to the cost of the proposals, through a payment equal to 18 months of base management fee on assets rolled over. It stated this would enable the UK Select Trust’s shareholders to roll-over their investment without the payment of any premium to HHI’s net asset value (NAV) on the new shares.
It is estimated the costs of the merger - excluding the liquidator's retention and any portfolio disposal costs, which will be borne by all UKT shareholders - will be approximately equal to 0.5 per cent of the UK Select Trust’s NAV.
David Warr, chairman of Threadneedle UK Select Trust, said: "Having undertaken a thorough review of the options available to the company, we are pleased to be able to recommend a merger with Henderson High Income Trust. Whilst the board has been satisfied with the investment performance of the company over recent years, we recognise the importance for shareholders of scale and liquidity for their investment and the appeal of an investment in a successor trust that offers an attractive dividend yield and a premium to NAV.”
Margaret Littlejohns, chairman of Henderson High Income, added: "The board of Henderson High Income Trust is delighted to be supporting this transaction. We believe our long term track record of delivering regular high income and capital growth over time from a portfolio predominantly invested in UK equities will be a compelling rollover opportunity for Threadneedle UK Select shareholders."
It is expected the details of the scheme seeking shareholder approval will be sent to shareholders in May 2017. The relevant general meetings are expected to be held in June 2017 and the merger is expected to become effective by the end of June 2017.
