The boards of BlackRock Throgmorton Trust (THRG) and BlackRock Smaller Companies Trust (BRSC) have approved resolutions to merge their portfolios, contingent on shareholder approval.
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This combination will result in a portfolio with £780m assets under management, the second-largest trust in the IT UK Smaller Companies sector. Following the merger, Roland Arnold will lead the enlarged BRSC, while Dan Whitestone will join as co-manager.
Activist investor Saba Capital, which currently owns 17.8% of THRG and 10.4% of BRSC, commended the boards for this decision.
“Saba welcomes today’s announcement, which includes several shareholder-friendly initiatives for the combined company, such as reduced management fees, lower ongoing charges, an initial cash exit opportunity and a triennial conditional exit opportunity.”
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Shareholders will be offered a 38% cash exit for THRG and 28% of BRSC’s shares.
Ronald Gould, chairman of BlackRock Smaller Companies, said: “This proposed combination represents an exciting opportunity for our shareholders: they will maintain their exposure to this highly attractive sub-sector with an enhanced management team whilst gaining the added benefit of being part of a larger and more liquid vehicle with reduced fees”
James Will, chairman of BlackRock Throgmorton Trust, added: “We are delighted to announce the proposed combination, which will create a £780m company that combines scale, efficiency, and proven investment expertise”
Over the past 10 years, both trusts have outperformed their benchmark, the Deutsche Numis Smaller Companies plus AIM ex investment companies’ sector, with THRG up 156.2% and BRSC up 104.1%.
However, the strategies have struggled in the more recent terms, underperforming the benchmark over the past five, three and one years, according to data from FE Analytics.
