Octopus Renewables Infrastructure (ORIT) is exploring a possible merger with the £257m Aquila European Renewables trust (AERI).
In a stock exchange announcement last month (22 December), the Octopus board proposed a combination which would create a £1.6bn renewable energy portfolio.
ORIT said it believes the two trusts have “complementary” portfolios, which would offer increased geographic diversification and almost no overlap between the two should the merger take place.
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In a separate stock exchange announcement, AERI’s board confirmed it had received unsolicited proposals from ORIT, and that it “continues to explore a number of different initiatives to address the issues facing the sector”.
The trust’s board added it will explore a range of options to “secure recognition” of the underlying value of the trust’s portfolio in its share price.
According to the Association of Investment Companies, AERI is currently trading at a 23.51% discount to its net asset value.
Matthew Read, senior analyst at QuotedData said: “AERI is a good size and has a decent track record of performance, so it should be able to expand again once markets settle. Given their different focuses, we’re yet to be convinced that merging these different strategies into one fund makes sense at the current time.
“We think that AERI’s board is right to consider a broader range of options if it thinks that one of these could ultimately lead to greater value for its shareholders than the ORIT offer that is currently on the table. AERI’s board will also need to consider the interests of all of its shareholders and not just those that ORIT has approached.”
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