There was some action in the normally sleepy world of investment trusts on Thursday, with Standard Life Aberdeen PLC (LON:SLA) star fund manager Harry Nimmo set to get an additional £168mln of assets to boost his portfolio to above £550mln.
Dunedin Smaller Companies Investment Trust PLC (LON:DNDL) revealed that it has agreed, in principle, the terms of a merger with Standard Life UK Smaller Companies Trust PLC (LON:SL.) which is run by Nimmo.
The news saw the Dunedin trust’s shares shoot 7.5% higher to 307p, while the Standard Life trust’s stock was unchanged at 512p in early afternoon trading.
In a statement, Dunedin Smaller Companies pointed out that, having undertaken a strategic review of its position in the sector, it is aware that its “size and the secondary market liquidity in its shares make it challenging to attract new investors in the Company.”
The trust said it believes that these factors have contributed to the discount at which the company's shares trade. Aberdeen Asset Management, which manages the investment trust, today disclosed that Dunedin Smaller Companies’ undiluted net asset value, excluding income, was 333.08p as at the close of business on 20 June 2018.
In addition, the Dunedin trust said, the recent merger of Aberdeen Asset Management PLC with Standard Life PLC – to create FTSE 100-listed Standard Life Aberdeen has resulted in the company being managed alongside a company with a very similar UK smaller companies mandate.
“Substantially greater secondary market liquidity”
James Barnes, the Dunedin trust’s chairman, said: "The proposed merger with Standard Life UK Smaller Companies Trust will resolve these issues, creating a merged trust with assets of over £550mln and substantially greater secondary market liquidity.
“As Standard Life UK Smaller Companies Trust has consistently had a substantially stronger rating than the Company, the Board believes that the merger will result in the Company's shareholders benefiting from a significant increase in the market value of their investment."
In a separate statement, Standard Life UK Smaller Companies’ chairman Allister Langlands commented: “The merger with Dunedin will benefit the company's shareholders, through increased scale, a reduction in the ongoing charges ratio and increased liquidity.
"This is the second merger that the company has undertaken in the last 10 years and demonstrates the board's intention to grow the company by a combination of performance and carefully considered corporate activity.”
In 2008, Standard Life UK Smaller Companies merged with the £40mln Gartmore Smaller Companies trust.