The boards of Henderson Eurotrust (HNE) and Henderson European Focus Trust (HEFT) have amended proposals ahead of an agreed merger, following a bid from a third party for HNE.
Following the announcement on 14 March, which would mean both trusts combine to make one flagship European product for Janus Henderson called Henderson European Trust, HNE’s board was sent an “unsolicited non-binding proposal” from a third party, regarding an alternative merger.
According to HNE’s board, the approach was considered before re-engaging with the board of HEFT as well as with major shareholders. Both trusts have subsequently revised the terms ahead of the proposed merger.
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Management fees for the combined trust for up to £500m per annum will stand at 60 basis points, but second-tier fees on assets between £500m to £1bn will be reduced from 50% to 47.5%. Charges on net assets above £1bn will be 45 basis point per annum.
Under previous proposals, HNE shareholders could choose to receive cash for some or all of their shareholding, subject to a limit of 5% of HNE’s share capital. HEFT was also proposing a tender offer to HEFT shareholders of up to 5% which, according to its board, “broadly reflected the cash exit being provided for HNE shareholders”. Now, the limit on the cash exit has been increased to 15%.
Janus Henderson has confirmed it will contribute £1.55m to combined costs associated with the merger. This would mean that, net of the 2% discount to the HNE cash exit and HEFT’s tender holder, the merger will be cost-neutral for existing investors.
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An further discount control mechanism has also been agreed on, in additional to the five-year performance-related tender offer already agreed on under previous proposals. Now, the trust’s combined board will consider “additional opportunities” no earlier than the initial three-year period following the merger.
The boards said: “The board of the combined trust’s consideration will, alongside other factors, recognise the importance to shareholders that the combined trust’s shares should not persistently trade at a significant discount to NAV in absolute terms or relative to the combined trust’s peer group.”
Formal documentation of the updated proposals will be send to shareholders by the end of the month, with general meetings due to be held in June and July. Both boards expect proposals to be concluded by the end of July.
Prior to the updated proposals, 37.6% and 35.4% of HNE and HEFT shareholders, respectively, had already suggested they would vote in favour of the merger. This number has increased, according to the trusts, following some of the amendments put forward.
