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(Sharecast News) - BlackRock Smaller Companies Trust said on Friday that it has agreed to merge with BlackRock Throgmorton Trust in a deal that will create a company with net assets of about 780m.
It said the merger will bring together "two similar investment companies with significant portfolio overlap", delivering greater scale, liquidity and cost efficiencies.
The enlarged BRSC will consolidate its position as the largest growth-focused trust in the Association of Investment Companies' UK Smaller Companies sector, it said.
Under the proposal, Throgmorton will be wound up. Eligible shareholders will have the option to elect for a cash exit in respect of a proportion of their shareholding in the company at a discount of 1% to net asset value. The company's cash exit will be implemented by way of a tender offer and will be limited to up to 28%.
Throgmorton will also offer a cash exit opportunity to shareholders for up to 38% of its issued share capital, subject to a 1% discount to NAV.
Activist investor Saba Capital Management, which has a 10.4% interest in BRSC and a 17.8% stake in THRG, has said it will vote in favour of the merger.
BRSC chairman Ronald Gould 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 which we believe will have the lowest ongoing charges of those companies in the AIC UK Smaller Companies sector without a performance fee.
"With increased scale, lower costs and improved liquidity, the enlarged BRSC will be well positioned to provide shareholders with sustained and enhanced exposure to this compelling growth opportunity over the medium and long term.
"Our proposal has been carefully constructed to deliver value to shareholders. Those who wish to realise value immediately at a 1% discount to NAV will have an opportunity to do so, whilst those who stay invested will benefit from a triennial 100% conditional tender offer to keep the management team focused on driving performance."
At 1255 GMT, BRSC shares were up 3.5% at 1,421.40p.
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