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17 Oct 2023 14:20
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION DIRECTLY OR INDIRECTLY (IN WHOLE OR IN PART) IN, INTO OR FROM THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA, ANY MEMBER STATE OF THE EEA, OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.
This announcement is not an offer to sell, or a solicitation of an offer to acquire, securities in the United States or in any other jurisdiction in which the same would be unlawful. Neither this announcement, nor any part of it, shall form the basis of, or be relied upon in connection with, or act as an inducement to enter into, any contract or commitment whatsoever.
17 October 2023
Shires Income plc
Publication of Prospectus and Circular in relation to the proposed combination of the Shires Income plc with abrdn Smaller Companies Income Trust plc
Introduction
It was announced on 26 July 2023 that the Board of Shires Income plc ("Shires" or the "Company") had agreed heads of terms with the Board of abrdn Smaller Companies Income Trust plc ("ASCI") for a combination of the assets of the ASCI with the assets of the Company (the "Combination"). If approved, the Combination is to be implemented through a scheme of reconstruction and voluntary winding-up of ASCI under section 110 of the Insolvency Act 1986 (the "Scheme") and the issue of new Ordinary Shares in the Company pursuant to the Scheme ("New Shires Shares").
The Board of Shires announces that the Company has today published a prospectus (the "Prospectus") in relation to the issue of New Shires Shares pursuant to the Scheme, together with a circular to provide the Company's shareholders (the "Shareholders") with further details of the Proposals and to convene a general meeting of the Company (the "General Meeting") to seek approval from Shareholders for the implementation of the Proposals (the "Circular").
The Board has been discussing for some time whether the Company's smaller company exposure, to date achieved through its significant shareholding in ASCI, could be delivered more efficiently and with less pricing volatility. The Board believes that the combination with ASCI should achieve this outcome and should also result in an increase in the size of the Company through the issue of the New Shires Shares under the Scheme.
The portfolio will continue to be managed by abdrn Fund Managers Limited ("AFML") as AIFM and abrdn Investments Limited as delegated Investment Manager, led by Iain Pyle and Charles Luke. The Company following completion of the Combination (the "Enlarged Company") will be managed in accordance with its existing investment objective: namely to provide a high level of income together with the potential for growth of both income and capital from a diversified portfolio, substantially invested in UK equities but also in preference shares, convertibles and other fixed income securities. The Enlarged Company will continue to have exposure to UK smaller companies but, through holding assets directly rather than indirectly through its shareholding in ASCI.
Benefits of the Proposals
Both investment trusts, which have a common manager, have UK equity income as a key part of their investment objectives, including exposure to UK smaller companies.
The Board believes that the Combination has the following benefits for Shareholders and the ASCI Shareholders:
Shareholders in the Enlarged Company are expected to benefit from:
· an increase in scale, allowing the Enlarged Company to spread fixed costs over a larger asset base and to benefit from the tiered management fee structure, while also potentially improving secondary liquidity and aiding marketability; and
· a differentiated UK equity income strategy with an attractive dividend, with some exposure to smaller companies and fixed income securities.
The Combination is also expected to deliver benefits to ASCI's shareholders, whether they wish to Rollover into the Company or wish to elect for the Cash Option.
For those ASCI Shareholders electing to Rollover into the Company:
Increased dividend
An expected increase of 31.7 per cent. per annum in dividend income based on the most recent four dividends for each company (that is a full year's dividend).[1]
Reduced costs
Expected decrease of 31.4 per cent in ongoing charges ratio (OCR) based on the estimated pro forma OCR of the Enlarged Company as compared with the last published OCR of ASCI as at 30 June 2023.[2]
Improved average rating
Over the twelve months to 24 July 2023 (being the latest practicable date prior to the release of the announcement of the Combination), the Company's Ordinary Shares traded at an average 1.5 per cent. discount to NAV, compared to ASCI's shares which traded at an average 13.2 per cent. discount to NAV.
As at 13 October 2023, the latest practicable date prior to publication of the Prospectus and Circular, the discounts to NAV at which ASCI's shares and the Company's Ordinary Shares traded were, respectively, 2.7 per cent. and 7.8 per cent.
The Company's historic investment performance[3]
The Company's NAV total return over 1, 3 and 5 years (measured to 13 October 2023) has been 9.2 per cent., 22.8 per cent. and 25.3 per cent. respectively.
The Company's share price total return over 1, 3 and 5 years (measured to 13 October 2023) has been 2.8 per cent., 25.8 per cent. and 22.9 per cent. respectively.
Continued UK smaller companies exposure:
The Board expects that UK small cap exposure will represent up to 20 per cent. of the Portfolio on an ongoing basis. By way of illustration, had 25 per cent. of ASCI Shareholders elected, or been deemed to have elected, for the Cash Option as at 13 October 2023 (being the latest practicable date prior to the publication of this document) approximately 54 per cent. of the ASCI Rollover Pool FAV would have comprised existing UK small cap assets.
In addition, ASCI Shareholders will have the ability to elect to receive cash in respect of 100 per cent. of their holding of ASCI shares, subject to the Cash Option Discount.
Details of the Scheme
The Scheme will be implemented by way of scheme of reconstruction of ASCI under section 110 of the Insolvency Act, resulting in the voluntary winding up of ASCI and a transfer of part of ASCI's cash, assets and undertaking to the Company in accordance with the Scheme and elections received from ASCI Shareholders.
The Scheme is conditional on both ASCI and Shires shareholder approval.
Pursuant to the Scheme, ASCI Shareholders can elect, in respect of their shareholdings, to receive:
(a) New Shires Shares (the "Rollover Option"); and/or
(b) cash (the "Cash Option").
There will be no limit on the number of ASCI Shares which may be elected for the Cash Option. A discount of 1.5 per cent. will be applied to the ASCI Residual Net Asset Value attributable to ASCI Cash Shares (the "Cash Option Discount"). The value arising from the application of the Cash Option Discount will be allocated to the Rollover Pool for the benefit of ASCI Shareholders who have elected, or are deemed to have elected, for the Rollover Option.
New Shires Shares will be issued to ASCI Shareholders in consideration for assets transferred from ASCI to the Company, calculated on a FAV for FAV basis, as set out in the Prospectus and Circular The New Shires Shares will be issued at a 0.80 per cent. premium to Shires NAV which is reflected in the Shires FAV, so as to reduce the asset and income dilutive effect of the costs of the proposals on Shires.
The assets will consist of investments aligned with the Company's investment policy, together with cash and cash equivalents. Any cash transferred will be used to acquire investments in accordance with the Company's investment policy.
The Company's entitlements as a shareholder of ASCI under the Scheme will be satisfied by way of a distribution in specie of cash or investments. This means that the Company will not receive any New Shires Shares pursuant to the Scheme.
Conditions of the Scheme
The Scheme is conditional upon:
(a) the passing of the resolutions at the ASCI General Meetings and any conditions of such resolutions being fulfilled;
(b) the passing of the Scheme Resolution at the General Meeting;
(c) the FCA agreeing to admit the New Shires Shares to the Official List and the London Stock Exchange agreeing to admit the New Shires Shares to trading on its Main Market, subject only to allotment; and
(d) the Directors and the ASCI Directors resolving to proceed with the Scheme.
Unless the conditions set out above have been satisfied or, to the extent permitted, waived by the Company and ASCI at or before 31 December 2023, the Scheme shall not become effective.
Admission and Dealings
Applications will be made by the Company to the FCA and to the London Stock Exchange for the New Shires Shares to be admitted to the premium segment of the Official List and to trading on the Main Market, respectively. If the Proposals become effective, it is expected that the New Shires Shares will be admitted to the Official List, and dealings on the Main Market will commence, on 4 December 2023.
General Meeting
The Scheme is conditional, among other things, upon Shareholders' approval of Resolution 1 to be proposed at the General Meeting. The General Meeting will be held on at 12.00 p.m. on 20 November 2023 at 280 Bishopsgate, London EC2M 4AG.
The Scheme Resolution will be proposed as an ordinary resolution and in order to be passed will, accordingly, require more than 50 per cent. of the votes cast to be voted in favour of it. The Scheme Resolution will, if passed, authorise the Directors to allot up to 20,000,000 New Shires Shares pursuant to the Scheme, such number being considered sufficient to satisfy the maximum number of New Shires Shares that could be required to be issued pursuant to the Scheme.
In addition, the Company will look to refresh its existing buyback and issuance authorities to reflect the increased size of the Enlarged.
Notice of the General Meeting is set out at the end of the Circular and contains the full text of the Resolutions.
Expected Timetable
Publication of the Circular and Prospectus | 17 October |
Latest time and date for receipt Letters of Direction for abrdn Share Plan holders for the General Meeting | 12.00 p.m. on 13 November |
Latest time and date for receipt of the Form of Proxy for the General Meeting | 12.00 p.m. on 16 November |
General Meeting | 12.00 p.m. on 20 November |
Announcement of results of the General Meeting | 20 November |
Calculation Date for value attributable under the Scheme | 5.00 p.m. on 27 November |
Announcement of the results of the Scheme and respective FAVs per share for Shires and ASCI | 1 December |
Effective Date of implementation of the Scheme | 1 December |
CREST Accounts credited with, and dealings commence in, New Shires Shares | 8.00 a.m. on 4 December |
Share certificates in respect of New Shires Shares despatched | not later than 10 Business Days from the Effective Date |
All times are UK times. Times and dates are subject to change. Capitalised terms used but not defined in this announcement have the meaning as set out in the Circular unless the context otherwise requires.
The Prospectus and Circular have been submitted to the Financial Conduct Authority and will shortly be available for inspection at the National Storage Mechanism which is located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the Company's website at
https://www.shiresincome.co.uk/en-gb.
Enquiries:
Robert Talbut, Chair
+44 207 463 6000
William Simmonds / Rupert Budge, J.P. Morgan Cazenove
+44 203 493 8000
William Hemmings / Maria Allen, abrdn Fund Managers Limited
+44 207 463 6223 / +44 203 680 0305
Legal Entity Identifier: 549300HVCIHNQNZAYA89
[1] Assumes 25 per cent. of ASCI's issued share capital will elect for the Cash Option
[2] Ibid
[3] Source: Refinitiv Datastream. In considering the historic performance information, prospective investors should bear in mind that past performance is not necessarily indicative of future results and there can be no assurance that the Company will achieve comparable results or be able to avoid losses.