The Schroder Asian Total Return investment company (ATR) has published details ahead of its proposed merger with the Pacific Assets Trust (PAC) in a circular.
The deal, which is subject to approval from both companies’ shareholders, would see PAC wind up and transfer a majority of its assets – including cash – to ATR in exchange for new shares, which would be made available to any PAC shareholders who have elected to roll over their investments.
New ordinary shares would be issued to these shareholders at 5p each; this will be the default option for eligible shareholders. Or, they would be able to take up to 25% of their investments in cash, subject to a 2% discount.
See also: Kepler: The underappreciated trusts investors may be missing out on
The trust would then cancel the share premium account, which is the money the trust would receive after issuing its shares for more than their face value.
The number of ATR shares to be issued to PAC shareholders would be calculated on a Formula Asset Value (FAV)-to-FAV basis, which takes into account the trust’s premium or discount to NAV, as opposed to calculating the share number purely at market value.
Benefits of the merger, according to ATR, include a larger NAV size of more than £1bn, lower ongoing charges of 0.66% compared to 0.8% for ATR and 1.1% for PAC, and a revised management fee structure. This would include a new annual management fee tier of 0.5%, which would be applied above £500m, as well as a reduction in the total fee cap paid to investment manager SUTL, from 1.25% to 1.15%.
If the merger is agreed, the new larger trust would also put forward a tender offer of up to 15% of its issued share capital to shareholders, if its NAV total return underperforms the benchmark.
See also: Schroder REIT and LondonMetric reach £404m deal for Picton
Both trusts would also be responsible for any costs involved in the merger, while SUTL has agreed to contribute to costs through a waiver of its base fee. At present, SUTL is entitled to annual management fees equal of 0.65% of ATR’s gross assets.
Shareholders must submit Forms of Proxy regarding the merger general meeting regarding the proposed merger by 11am on 4 September, while a general meeting announcing the results will take place at 11am on 8 September.
