Alliance Trust PLC (LSE:ATST) and Witan Investment Trust plc (LSE:WTAN) have agreed to merge and form Alliance Witan PLC, which will be propelled into the FTSE 100.
Keeping Alliance’s multi-manager investment model, £1.6 billion market cap Witan’s assets will be merged into £4.3 billion Alliance, producing a company that will be among the fifth or sixth largest in London.
The deal also introduces a competitive fee structure, expected to lower the ongoing charges ratio in the high 50 basis points in future financial years from current ratios of 76bps and 62bps, respectively.
Enhanced dividends this year and improved market liquidity are anticipated, with no significant NAV dilution, and Alliance’s investment manager, Willis Towers Watson, makes a “significant contribution” to help absorb transaction costs.
Witan, which has been mulling various plans since CEO Andrew Bell announced his retirement, said the merger would have “tangible economic upside” for its shareholders, who will benefit from an immediate uplift in the value of their shareholding to the extent that Alliance Trust shares are trading at a tighter discount to net asset value.
Witan investors will also be given the opportunity to elect for a cash exit at a “price close to NAV, for some or all of their holding”.
Completion is expected around the start of the fourth quarter of the year.
Alliance Trust chair Dean Buckley said the merger "brings together the two leading open-architecture multi-manager investment company propositions in the UK to form a FTSE 100 equity investment vehicle with the quality, cost efficiency and profile to play a leading role in the UK investment market".
He noted that Witan was an early adopter of the multi-manager strategy and that the combination of companies established in 1888 and 1909 "recognises the attractive opportunity to deploy the investment strategy, which has proved to be robust through the investment cycle, at significantly greater scale".
Witan chair Andrew Ross said since Bell's retirement announcement the board had looked to identify the best candidate to take on the management of the company's assets and was unanimous in recommending the combination with Alliance Trust, allowing the continuation of the multi-manager approach at lower fees and in a larger, more liquid vehicle.