Janus Henderson has proposed combining two small income-focused investment trusts to save costs and boost liquidity.
Through the deal, Henderson High Income Trust PLC (LSE:HHI) (HHI) will merge with Henderson Diversified Income Trust plc (LSE:HDIV) (HDIV), creating a trust with a market value of around £310 million based on yesterday’s close.
Janus Henderson will continue to manage the enlarged trust after the merger, which will involve HDIV being wound up with shareholders offered the option of shares in HHI or cash at a 1% discount to net asset value.
To sweeten the deal, Janus Henderson added it will pay the costs involved in the merger up to a maximum of £1.1 million.
Income funds have been coming under pressure recently due to the rise in interest rates with many banks and building societies offering fixed-rate products with similar yields.
Government-backed NS&I for example recently launched a bond paying 6.2%.
HDIV currently yields 7% at a 10% discount to its 62.4p share price while HHI pays 6.5% on a modest 3% discount to its share price of 157p.