TIDMHDIV
RNS Number : 5914O
Henderson Diversified Income TstPLC
04 October 2023
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,
IN WHOLE OR IN PART, IN OR INTO, THE UNITED STATES OF AMERICA
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ZEALAND, THE REPUBLIC OF SOUTH AFRICA, IN ANY MEMBER STATE OF THE
EEA OR IN ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE
UNLAWFUL .
This announcement is not an offer to sell, or a solicitation of
an offer to acquire, securities in the United States or in any
other jurisdiction in which the same would be unlawful. Neither
this announcement nor any part of it shall form the basis of or be
relied on in connection with or act as an inducement to enter into
any contract or commitment whatsoever.
This announcement contains information that is inside
information for the purposes of Article 7 of the UK version of
Regulation (EU) No. 596/2014 which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018, as amended (the Market
Abuse Regulation).
04 October 2023
Henderson Diversified Income Trust plc
Legal Entity Identifier: 213800RV2228EO1JEN02
Proposed Combination with Henderson High Income Trust plc
Introduction
The Board of Henderson Diversified Income Trust plc (the
"Company" or "HDIV") is pleased to announce that it has agreed
heads of terms with the Board of Henderson High Income Trust plc
("HHI") in respect of a proposed combination of HDIV with HHI. The
combination, if approved by each company's shareholders, will be
effected by way of a scheme of reconstruction and winding up of
HDIV under section 110 of the Insolvency Act 1986 (the "Scheme")
and the associated transfer of part of the assets and undertaking
of HDIV to HHI in exchange for the issue of new ordinary shares in
HHI ("New HHI Shares") (together the "Proposals").
HDIV shareholders will be able to elect either to receive New
HHI Shares and / or realise part, or all, of their holding for
cash.
Background to the Scheme
As highlighted in the Chairman's statement in the most recent
annual report, the Board has for some time been concerned that the
diversified income strategy envisaged for the Company at launch had
not anticipated the economic conditions which have subsequently
prevailed. For example, it has proved difficult for the fund
managers to take advantage of their ability to invest in loans and
the Board were concerned about the effectiveness of this strategy
in maintaining income levels and the capital value of the Company
in real terms in the future. The diminishing size of the Company,
with consequential impact on costs, returns and liquidity, was also
a concern for the Board.
The Board invited proposals from a number of investment
companies, with alternative investment processes which could offer
greater scope to provide a more consistent return to shareholders,
as well as examining various other options for the Company,
including liquidation.
The Board believes that the proposal put forward by HHI offers
numerous benefits to those shareholders who elect to rollover into
HHI, whilst at the same time, importantly, offers shareholders the
option of a full and unrestricted cash exit at a value close to
liquidation value.
Benefits of the Proposals
The Board believes that the Proposals have a number of benefits
for HDIV shareholders:
-- Opportunity for full cash realisation : An unlimited cash
exit option will give HDIV shareholders the option to realise all
or part of their holding at a 1.0 per cent. discount to HDIV's net
asset value ("NAV") per share.
-- Continuity with Janus Henderson : Janus Henderson Investors
UK Limited ("Janus Henderson") has a recognised equity income
franchise which offers shareholders the potential for greater total
return. HHI includes a fixed income allocation which is selected by
HDIV's current fund managers.
-- Continuity of high income levels : HHI has a 6.5 per cent.
dividend yield, a significant premium to the FTSE All-Share Index's
yield, and dividend growth of 2 per cent. per annum over the last
10 years.
-- Strong investment track record : HHI has outperformed its
benchmark (80 per cent. FTSE All Share Index, 20 per cent. ICE BofA
Sterling Non Gilts Index rebalanced annually) over 1, 3, 5 and 10
years and delivered a 20-year share price capital return ahead of
CPI inflation.
-- Lower costs : HHI has a competitive management fee of 0.50
per cent. on gross assets up to GBP325 million and 0.45 per cent.
above, a fee below that currently paid by HDIV shareholders (0.65
per cent. of net assets). HHI's latest ongoing charges ratio
("OCR"), which would be expected to decrease post the Scheme given
greater scale, is 0.84 per cent., versus 0.98 per cent. for
HDIV.
-- Narrower discount: HHI has a record of trading at a tighter
discount to its underlying NAV when compared to HDIV historically.
[1] HDIV's discount to NAV as at 2 October 2023 was (10.1) per
cent. whereas HHI's was (4.0) per cent., providing attractive
look-through value for HDIV shareholders electing to receive New
HHI Shares.
-- Significant cost contribution from Janus Henderson : Janus
Henderson, the investment manager of both HHI and HDIV, will offer
a contribution to the costs of the Proposals of 1.25 per cent. of
the value of the assets rolling over to HHI, up to a maximum of
GBP1.1 million. Janus Henderson will also waive any fee that would
otherwise be payable on termination of the HDIV investment
management agreement.
-- Increase in scale : An enlarged HHI will allow fixed costs to
be spread over a larger cost base, alongside improving liquidity
and aiding marketing.
-- Ability to stay invested in a tax efficient manner : As part
of the Proposals, HDIV shareholders will have the option of a
rollover into HHI without triggering capital gains tax.
Summary of the Scheme
The Proposals will be effected by way of a scheme of
reconstruction of HDIV under section 110 of the Insolvency Act
1986, resulting in the voluntary winding up of HDIV and the
transfer of part of HDIV's cash, assets and undertaking to HHI on a
Formula Asset Value ("FAV") for FAV basis.
Under the Scheme, HDIV shareholders will be entitled to elect to
receive in respect of some or all of their HDIV shares:
-- New HHI Shares (the "Rollover Option"); and/or
-- cash (the "Cash Option").
The Cash Option will be offered at a discount of 1.0 per cent.
to the HDIV NAV per share (the "Cash Discount"). There will be no
limit on the number of HDIV shares which may be elected for the
Cash Option. New HHI Shares will be issued as the default option
under the Scheme in the event that HDIV shareholders do not make a
valid election under the Scheme.
As noted above, the Scheme will be undertaken on a FAV for FAV
basis. The FAV of HHI (the "HHI FAV") and the FAV of HDIV (the
"HDIV FAV") for the purposes of the Scheme will be calculated in
accordance with the respective company's normal accounting policies
and take into account any respective costs in excess of the Janus
Henderson Contribution (as defined below) payable by each Company,
with the exception of stamp duty and listing fees which will be
paid by the enlarged HHI, and any dividends declared but not paid
prior to the calculation date.
The HHI FAV will be equal to the HHI NAV, subject to the
aforementioned adjustments, plus a premium of 1.0 per cent. The
uplift in FAV delivered by the Cash Discount will be for the
benefit of the HDIV shareholders electing for the Rollover
Option.
The Scheme will be subject to approval by the shareholders of
both companies in addition to regulatory and tax approvals. In
accordance with customary practice for such transactions involving
investment trusts, the City Code on Takeovers and Mergers is not
expected to apply to the Scheme. A timetable and further details of
the Scheme will be announced in due course.
Costs of the Proposals and Janus Henderson Contribution
As noted above, Janus Henderson has undertaken to make a
contribution to the costs of the Proposals. This contribution will
be calculated as 1.25 per cent. of the value of the assets
transferred to HHI by HDIV, up to a maximum contribution of GBP1.1
million and subject to a minimum contribution of GBP360,000,
whether or not the Scheme is implemented (the "Janus Henderson
Contribution"). The Janus Henderson Contribution will be allocated
first to pay HHI's fixed costs, up to a cap of GBP550,000, with any
balance of the Janus Henderson Contribution allocated to pay HDIV's
costs. The Janus Henderson Contribution will be reflected in the
relevant FAVs of each company.
Dividend
It is expected that the Company will pay a pre-liquidation
interim dividend of current year net revenue to the extent that it
exceeds current year distributions to all shareholders, including
those who elect for the Cash Option.
Overview of HHI
Summary
HHI is a United Kingdom-based investment trust whose investment
objective is to invest in a diversified selection of both
well-known and smaller companies to provide investors with a high
dividend income stream while also maintaining the prospect of
capital growth.
The majority of HHI's assets are invested in ordinary shares of
listed companies with the balance in listed fixed interest
securities. 88 per cent. of the portfolio is currently listed
equities and 12 per cent. fixed interest securities. [2] HHI
invests predominantly in equities listed in the UK but can also
invest up to 30 per cent. of total assets in non-UK listed
companies.
HHI has an active policy of using gearing, both in the form of
bank and longer-term borrowings, to enhance income returns but also
to achieve capital growth over time. A portion of gearing is
usually employed with respect to HHI's fixed interest securities to
generate additional income.
HHI is managed by Janus Henderson, a global asset management
firm, which has over GBP250 billion under management. Janus
Henderson is also the incumbent investment manager of HDIV and in
total manages 12 investment trusts.
Following completion of the Scheme, it is intended that the HHI
portfolio will continue to be managed on the same basis as it is
currently. In particular, the HHI investment policy and investment
objective will not be amended in connection with the Scheme and the
portfolio will continue to be managed by David Smith CFA as the
lead portfolio manager, supported by the 15-person strong Janus
Henderson Global Equity Income team and the fixed income team for
the bond allocation.
Management fee and ongoing costs
The base management fee is charged at 0.50 per cent. of average
adjusted gross assets up to GBP325 million. A reduced management
fee of 0.45 per cent. is applied to average adjusted gross assets
above GBP325 million. This average value is calculated by using the
values on the last day of each of the two calendar years preceding
the reporting year. Average adjusted gross assets are gross assets
less current liabilities.
The ongoing charge for the year-ended 31 December 2022 was 0.84
per cent..
Expected timetable
It is currently envisaged that a shareholder circular setting
out the details of the Scheme and containing notices of the general
meetings at which shareholder approval for, inter alia, the Scheme
will be sought, will be sent to shareholders in December 2023. The
relevant general meetings are expected to be held in January
2024.
Angus Macpherson, Chair of HDIV, said:
"Importantly, shareholders will be offered a choice - a full
cash exit at close to liquidation value, rollover into HHI, or a
combination of both. Those shareholders who roll will maintain a
similar income profile, managed by the same investment group, but
with the advantage of greater scale and liquidity. Whilst the
rollover option represents a change of asset allocation to a
majority equity mandate, the fixed income team of HDIV will
continue to manage the smaller bond allocation of HHI, providing
some continuity for shareholders. HHI's record, if it continues in
the future, of capital growth, a high and growing dividend and
trading at a tighter discount to NAV should also benefit
shareholders."
For further information please
contact:
Henderson Diversified Income Contact via Janus Henderson
Trust plc
Angus Macpherson
Janus Henderson Investors
UK Limited +44 (0) 207 818 1818
Dan Howe (Head of Investment
Trusts)
Oliver Packard (Sales)
Harriet Hall (PR)
J.P. Morgan Cazenove +44 (0) 203 493 8000
William Simmonds
Rupert Budge
Important Information
The person responsible for arranging for the release of this
announcement on behalf of Henderson Diversified Income Trust plc is
Janus Henderson Secretarial Services UK Limited acting as Corporate
Secretary.
This announcement is not for publication or distribution,
directly or indirectly, in or into the United States of America.
This announcement is not an offer of securities for sale into the
United States. The securities referred to herein have not been and
will not be registered under the U.S. Securities Act of 1933, as
amended, and may not be offered or sold in the United States,
except pursuant to an applicable exemption from registration. No
public offering of securities is being made in the United
States.
[1] As at 02 October 2023. HDIV's average discount over the last
three years has been (5.7) per cent versus (1.7) per cent for HHI.
Source: Refinitiv
[2] As at 31 August 2023
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