(Alliance News) - Fidelity European Trust PLC on Thursday proposed a tie-up with Henderson European Trust PLC, as the duo look to create a "go to trust" for European investing.
Fidelity European Trust and Henderson European Trust are both investment trusts that are focused on European investing and listed on the FTSE 250 index.
Fidelity European said both boards have reach an agreement regarding a combination.
Should the merger be approved by each set of shareholders, it would lead to a voluntary wind up of Henderson European and the transfer of part of its assets to Fidelity European. Henderson European shareholders would receive new shares in Fidelity European, unless they opt for cash.
However, Fidelity European noted that the cash option is limited to a third of Henderson European shares.
The enlarged Fidelity European Trust, it said, would continue operating with its existing investment objective and policy, maintaining the same portfolio managers.
The benefits of the combined entity cited by Fidelity European include "unparalleled scale and enhanced profile", with the new vehicle expected to possess net assets greater than GBP2.1 billion.
Other benefits stated include a lower tiered management fees, a lower ongoing charges ratio, enhanced liquidity and an enhanced discount management policy.
Under the proposed merger, Fidelity European said the number of new Fidelity European shares issued as part of the deal would be determined on a formula asset value for formula asset value basis.
Fidelity European said it expects general meetings to convene regarding the proposed transaction in early to mid-September, with the scheme becoming effective by the end of September. It added that proposals will also be subject to the relevant regulatory and tax approvals.
This proposed combination follows a flurry of recent M&A activity in the investment trust sector. Back in February, JPMorgan Global Growth & Income PLC and Henderson International Income Trust PLC agreed to a combination that created an investor with GBP3.4 billion in net assets.
This followed JGGI's combination with JPMorgan Multi-Asset Growth & Income last year, and its tie-up with JPMorgan Elect PLC and Scottish Investment Trust in 2022.
Further, Henderson European Trust was the result of a merger last year, as Henderson European Focus Trust PLC combined assets with Henderson EuroTrust PLC.
Shares in Fidelity European Trust were down 0.8% at 399.60 pence on Thursday morning in London, while Henderson European Trust shares rose 3.4% to 196.40p. Henderson European has a market capitalisation of GBP606.5 million. Fidelity European Trust is worth GBP1.63 billion.
Fidelity European Chair Davina Walter commented: "The board of Fidelity European Trust believes this is an exciting opportunity, with compelling benefits for both sets of shareholders, to create the 'go to trust' for investing in Europe. The proposals will result in the company being well positioned to continue to deliver attractive returns, with new and existing shareholders benefitting from a reduced management fee and a lower ongoing costs ratio.
"I would like to thank Fidelity for its commitment to the proposals and look forward to working closely with the board of Henderson European Trust to deliver an outcome that is in the best interests of both existing and future shareholders."
By Christopher Ward, Alliance News reporter
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Fidelity European Values (FEV)
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