TIDMHDIV
RNS Number : 5412W
Henderson Diversified Income TstPLC
12 December 2023
This announcement replaces Publication of Circular announcement
released on 12 December at 16.40 under RNS number 5397W.
Text which referred to a waiver rather than offset of fees has
been corrected.
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
(INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED
STATES AND THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN, NEW
ZEALAND, THE REPUBLIC OF SOUTH AFRICA 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.
12 December 2023
Henderson Diversified Income Trust plc
Legal Entity Identifier: 213800RV2228EO1JEN02
Publication of Circular in connection with the recommended
proposals for the reconstruction and winding-up of the Company
Introduction
The Board of Henderson Diversified Income Trust plc (the
"Company" or "HDIV")) announced on 4 October 2023 that it had
agreed heads of terms for a combination of the assets of the
Company with Henderson High Income Trust plc ("HHI" or "Henderson
High Income") by means of a scheme of reconstruction and members'
voluntary winding up of the Company under section 110 of the
Insolvency Act (the "Scheme") and the issue of New HHI Shares to
Shareholders who elect, or are deemed to have elected, to roll over
their investment into HHI (the "Proposals").
Pursuant to the Proposals, which are conditional upon, amongst
other things, the approval of Shareholders at the General Meetings
and the approval of HHI Shareholders of the issue of the New HHI
Shares, Shareholders will be entitled to elect to receive in
respect of some or all of their Shares:
(a) New HHI Shares (the "Rollover Option"); and/or
(b) cash (the "Cash Option").
The default option under the Scheme is for Shareholders to
receive New HHI Shares meaning that Shareholders who, in respect of
all or part of their holding of Shares, do not make a valid
election or who do not make an election at all under the Scheme
will be deemed to have elected for New HHI Shares in respect of
such holding. Shareholders should note that the issue price for New
HHI Shares under the Rollover Option may be above the market price
of the HHI Shares if the HHI Shares continue to trade at a discount
to their underlying net asset value. This discount was 7.41 per
cent. as at 7 December 2023 (being the latest practicable date
prior to the publication of the Circular).
The Board announces that the Company has today published a
circular (the "Circular") to provide Shareholders with further
details of the Proposals and to convene two general meetings of the
Company (the "General Meetings") to seek approval from Shareholders
for the implementation of the Proposals.
Background to and rationale for the Proposals
The Board has for some time been concerned that the diversified
income strategy envisaged for the Company at launch in 2017 had not
anticipated the economic conditions which have subsequently
prevailed; for example, it has proved difficult for the portfolio
managers to take advantage of their ability to invest in loans. The
Board is concerned about the effectiveness of the investment
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 its consequential impact on costs, returns and
liquidity, is also a concern for the Board.
The Board invited proposals from several 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.
Following a review of those options put forward for the future
of the Company, the Board believes that the proposed combination
with HHI offers numerous benefits to those Shareholders who elect
to rollover into HHI, whilst at the same time, importantly,
offering Shareholders the option of a full cash exit at a value
close to liquidation value.
Benefits of the Proposals
The Board believes that the Proposals have the following
benefits for Shareholders:
-- Opportunity for full cash realisation : An unlimited cash
exit option will give Shareholders the option to realise all or
part of their holding at a 1.0 per cent. discount to HDIV's net
asset value per share.
-- Continuity of investment manager for Shareholders electing
for the Rollover Option : 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 the Company's current fund managers.
-- Continuity of high income levels : As at 30 November 2023,
the HHI Shares stood on a 6.7 per cent. dividend yield,
representing a significant premium to the FTSE All-Share Index's
yield, and have generated compound average dividend growth of 2.1
per cent. per annum over the last 10 years.
-- Strong investment track record : As at 30 November 2023, HHI
had outperformed its benchmark (being a composite of 80 per cent.
of the FTSE All Share Index (total return) and, 20 per cent. of the
ICE BofA Sterling Non-Gilts Index (total return) rebalanced
annually) over one, three, five and 10 years. HHI had also
delivered a 20-year share price capital and total return of 40.7
per cent. and 383.2 per cent., respectively, and a NAV (with debt
at fair value) capital and total return of 52.9 per cent. and 416.3
per cent., respectively[1].
-- Lower costs : HHI has a competitive management fee of 0.50
per cent. on average adjusted gross assets up to GBP325 million and
0.45 per cent. above, a fee below that currently paid by
Shareholders (0.65 per cent. of net assets). HHI's latest ongoing
charges ratio, 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 the Company over
the past three years. The Company's three year average discount to
NAV as at 7 December 2023 was 5.9 per cent. whereas HHI's was 1.6
per cent. (the Company's discount to NAV at 7 December 2023 was
5.47 per cent. whereas HHI's was 7.41 per cent and the Company's
discount to NAV on 3 October 2023, the day before the announcement
of the Proposals, was 9.81 per cent, compared to HHI's discount of
1.68 per cent on the same date).
-- Costs contribution from Janus Henderson : Janus Henderson may
offer a contribution to the costs of the Proposals, by way of an
offset of part, or all, of its ongoing management fees payable by
HHI and, if applicable, HDIV, of 1.25 per cent. of the value of the
assets rolling over to HHI, up to a maximum of GBP1.1 million,
which will be allocated first to pay the fixed costs of HHI (up to
GBP550,000) and any balance towards the Company's costs (the "Janus
Henderson Contribution"). Janus Henderson will also waive any fee
that would otherwise be payable on termination of its investment
management agreement with the Company.
-- Increase in scale : An enlarged HHI will allow fixed costs to
be spread over a larger equity base, alongside improving liquidity
and aiding marketing.
-- Ability to stay invested in a tax efficient manner : Pursuant
to the Scheme, Shareholders electing to roll over their investment
into HHI may do so without triggering a charge to capital gains
tax.
The Scheme
Subject to the passing of the Resolutions, and to the
satisfaction of the other conditions of the Scheme, the Company
will be placed into members' voluntary liquidation and the Scheme
will take effect on the Effective Date (expected to be 16 January
2024). Upon the Scheme becoming effective, the cash, undertaking
and other assets of the Company comprising the Rollover Pool will
be transferred to HHI pursuant to the Transfer Agreement in
consideration for the issue of New HHI Shares to those Shareholders
who have elected, or are deemed to have elected, for the Rollover
Option. The relevant number of New HHI Shares will be allotted to
the Liquidators who will renounce the New HHI Shares in favour of
such Shareholders.
The issue of New HHI Shares under the Scheme will be effected on
a formula asset value ("FAV") for formula asset value basis as at
the Calculation Date as described below and in detail in Part 4 of
the Circular.
Shareholders who elect, or are deemed to elect, for the Rollover
Option will be entitled to receive New HHI Shares on the basis of
the ratio of the HDIV FAV per Share to the HHI FAV per Share,
multiplied by the number of Shares so elected. The value of the
Rollover Pool will be calculated on the basis of the Company NAV
adjusted for: (a) the value of the Liquidation Pool, including the
Retention; (b) any costs of the Proposals payable by the Company
(to the extent the same do not form part of the value of the
Liquidation Pool); and (c) the benefit of the Janus Henderson
Contribution, if any, less the Cash Pool NAV and plus the benefit
of the Cash Option Discount (being the "HDIV FAV"). The HDIV FAV
per Share will be equal to the HDIV FAV divided by the total number
of Shares that have elected for the Rollover Option (calculated to
six decimal places).
The calculation of the HHI FAV will take into account: (i) the
fixed costs and expenses to HHI of the Proposals; (ii) any
dividends declared but not paid by HHI to HHI Shareholders prior to
the Effective Date; (iii) the Janus Henderson Contribution; and
(iv) a premium of 1.0 per cent. The HHI FAV per Share will be equal
to the HHI FAV divided by the number of HHI Shares in issue
(excluding any treasury shares) on the Calculation Date (calculated
to six decimal places).
The New HHI Shares will rank equally in all respects with HHI's
existing issued shares other than in respect of dividends declared
with a record date prior to the Effective Date.
The Cash Option
As part of the Proposals, Shareholders may elect to receive cash
instead of New HHI Shares in respect of some or all of their
holdings the Company. There will be no limit on the amount of HDIV
Shares that may be elected for the Cash Option and Shareholders are
entitled to elect for the Cash Option in respect of their entire
holding of Shares.
Shareholders who elect, or are deemed to elect, for the Cash
Option will be entitled to receive the net realisation proceeds of
such portion of the Cash Pool to which they are entitled. The
appropriation of the Company's assets to the Cash Pool will be
based on the value of the Company NAV per Share less a discount of
1.0 per cent. (the "Cash Option Discount") (the "Cash NAV per
Share") multiplied by the number of Shares so elected (calculated
to six decimal places). The value of the Cash Pool will be equal to
the Cash NAV per Share multiplied by the number of Shares that have
elected for the Cash Option (the "Cash Pool NAV"). As described
below, the value arising from the application of the Cash Option
Discount shall be allocated to the value of the Rollover Pool for
the benefit of Shareholders electing, or who are deemed to have
elected, for the Rollover Option.
Illustrative entitlements
For illustrative purposes only, had the Calculation Date been
market close on 7 December 2023 and assuming that no Shareholders
exercise their right to dissent from participation in the Scheme,
after deduction of the pre-liquidation interim dividend of 0.55
pence per Share and assuming 50 per cent. of the Company's current
issued Share capital is elected for the Cash Option:
-- the Cash NAV per Share would have been 70.001574 pence and
the HDIV FAV per Share would have been 70.916929 pence. The Cash
NAV per Share and the HDIV FAV per Share may be compared with the
Company's share price and cum-income NAV per Share as at 7 December
2023 which, when adjusted on a pro forma basis for the deduction of
the pre-liquidation interim dividend of 0.55 pence per Share, were
66.850000 pence and 70.708661 pence, respectively; and
-- the HHI FAV per Share would have been 166.345569 pence which,
for the Rollover Option, would have produced a conversion ratio of
0.426322 and, in aggregate, 38,810,802 New HHI Shares would have
been issued to Shareholders electing for the Rollover Option under
the Scheme, representing approximately 23 per cent. of the issued
ordinary share capital of the enlarged Henderson High Income
immediately following completion of the Scheme. The enlarged
Henderson High Income would also then have paid listing fees in
relation to the listing of the New HHI Shares equal to 0.082280
pence per HHI Share, which would have resulted in a cum-income NAV
per HHI Share with debt at fair value of 164.995498 pence. This may
be compared with HHI's share price and cum-income NAV per share
(with debt at fair value and after deducting for HHI's fourth
interim dividend in respect of the financial year to 31 December
2023 of 2.625 pence per share) as at 7 December 2023 of 152.5 pence
and 164.7 pence, respectively.
Summary information on HHI
HHI is a UK investment trust whose investment objective is to
invest in a prudently 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.
HHI's benchmark is a composite of 80 per cent. of the FTSE
All-Share Index (total return) and 20 per cent. of the ICE BofA
Sterling Non-Gilts Index (total return) rebalanced annually. As at
7 December 2023, HHI had a net asset value with debt at fair value
of approximately GBP213,773,000 after deducting for HHI's fourth
interim dividend in respect of the financial year ended 31 December
2023 of 2.625 pence per HHI Share.
The majority of HHI's assets are currently invested in the
ordinary shares of listed companies, with the balance invested in
listed fixed interest securities and preference shares. As at 30
November 2023, excluding cash, 87.4 per cent. of the portfolio was
listed equities,11.0 per cent. was fixed interest securities and
1.6 per cent. was preference shares.
HHI invests predominantly in the securities of UK companies but
can also invest up to 30 per cent. of gross assets outside of the
UK.
HHI has an active policy of using appropriate levels of gearing,
both in the form of bank and longer-term borrowings, with the
objective of enhancing income returns and also achieving capital
growth over time. A portion of gearing is usually employed with
respect to HHI's fixed interest securities to generate additional
income.
Further details on HHI, including details of its performance
track record, are set out in the Circular and in the HHI
Prospectus.
Conditions of the Proposals
Implementation of the Proposals is subject to a number of
conditions, including:
-- the passing of the Resolutions to be proposed at the First
General Meeting and the Resolution to be proposed at the Second
General Meeting (or any adjournment of those General Meetings), and
any conditions of such Resolutions being fulfilled;
-- the HHI Resolution being passed and becoming unconditional in
all respects;
-- the approval of the Financial Conduct Authority and the
London Stock Exchange of the Admission of the New HHI Shares to the
Official List and to trading on the Main Market; and
-- the Directors and the HHI Directors resolving to proceed with
the Scheme.
If any condition is not satisfied, the Proposals will not become
effective, the Company will not proceed with the members' voluntary
winding up and instead will continue in existence and will continue
to be managed under the current investment policy. In such
circumstances the Directors would reassess the options available to
the Company at that time
Transfer Agreement
If the resolution to be proposed at the Second General Meeting
is passed, the Company will enter into the Transfer Agreement on
the Effective Date, pursuant to which the Rollover Pool will be
transferred to HHI in consideration for the issue of New HHI Shares
to the Liquidators who will renounce the New HHI Shares in favour
of Shareholders who have elected, or are deemed to have elected,
for the Rollover Option. The parties to the Transfer Agreement have
entered into irrevocable undertakings to enter into the Transfer
Agreement on the Effective Date in the event that all of the
conditions to the Scheme are satisfied in full.
Costs and expenses of the Proposals
The Company and HHI have each agreed to bear their own costs in
relation to the Scheme. The costs of the Scheme payable by the
Company are expected to be approximately GBP745,540 inclusive of
VAT which, for the purposes of this calculation, is assumed to be
irrecoverable where applicable. This estimate of costs excludes the
Liquidators' retention to cover unknown liabilities (estimated at
GBP50,000) and does not take account of any dealing costs which
will be incurred by the Company in disposing of assets to meet
Elections made and in realigning the portfolio in respect of the
Rollover Pool to be established pursuant to the Scheme, prior to
the Effective Date.
Assuming 50 per cent. of the Company's current issued Share
capital is elected for the Cash Option, the fixed costs of the
Proposals payable by HHI are expected to be approximately
GBP461,300 inclusive of VAT which, for the purposes of this
calculation, is assumed to be irrecoverable, where applicable. In
addition, HHI will also incur listing fees in respect of the
listing of the New HHI Shares and SDRT based on the value and
constitution of the Rollover Pool.
In the event either or both of the Company and HHI resolve not
to proceed to implement the Scheme on the terms described in the
Circular (including if Shareholders and/or HHI Shareholders do not
approve any resolutions required to implement the Scheme) then each
party will bear its own costs. If the Scheme is not implemented,
dealing costs (including SDRT) may still have been incurred by the
Company in disposing of assets in order to meet Elections made and
in realigning the Company's portfolio in respect of the Cash Pool
and Rollover Pool to be established pursuant to the Scheme.
To the extent that any part of the Liquidation Pool, including
the Retention, is not subsequently required to discharge the
Company's liabilities, it will be distributed in cash to
Shareholders on the Register on the Effective Date provided that if
any such amount payable to any Shareholder is less than GBP5.00, it
shall not be paid to the Shareholder but instead shall be paid by
the Liquidators to the Nominated Charity.
Janus Henderson Fund Management UK Limited ("Janus Henderson")
has agreed to make a contribution to the costs of the Scheme (the
"Janus Henderson Contribution"). The Janus Henderson Contribution
will be calculated as 1.25 per cent. of the value of the Rollover
Pool (excluding the benefit of any amount of the Janus Henderson
Contribution), up to a maximum contribution of GBP1,100,000 and
subject to a minimum contribution of GBP360,000. 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 JHFM
Contribution allocated to pay the Company's costs. For the
avoidance of doubt, the Janus Henderson Contribution will be
reflected in the calculation of the HHI FAV per Share and, if
applicable, the HDIV FAV per Share.
In addition, Janus Henderson has agreed to waive, subject to the
Scheme becoming effective, the termination fee which would
otherwise be payable to it in respect of the termination of its
investment management agreement with the Company
General Meetings
The Proposals are conditional, amongst other things, upon
Shareholders' approval of the Resolutions to be proposed at the
General Meetings. The First General Meeting will be held on 8
January 2024 at 11.00 a.m. and the Second General Meeting will be
held on 16 January 2024 at 10.30 a.m, both at 201 Bishopsgate,
London EC2M 3AE.
Further detail on the Resolutions is included in the
Circular.
Recommendation
The Board, which has received financial advice from JPMC,
considers the Proposals and the Resolutions to be proposed at the
General Meetings to be in the best interests of Shareholders as a
whole. In providing advice to the Board, JPMC has relied on the
Board's commercial assessment of the Proposals.
Accordingly, the Board unanimously recommends that Shareholders
vote in favour of the Resolutions to be proposed at the General
Meetings, as the Directors intend to do in respect of their own
beneficial holdings, which in aggregate amount to 188,988 Shares,
representing approximately 0.10 per cent. of the Company's issued
share capital as at 7 December 2023.
The Board cannot, and does not, give any advice or
recommendation to Shareholders as to whether, or as to what extent,
they should elect for either of the options under the Proposals.
The choice between the options available under the Proposals will
be a matter for each Shareholder to decide and will be influenced
by his or her individual investment objectives and by his or her
personal, financial and tax circumstances. Accordingly,
Shareholders should, before deciding what action to take, read
carefully all the information in the Circular and in the HHI
Prospectus. Shareholders who are in any doubt as to the contents of
the Circular or the HHI Prospectus or as to the action to be taken
should seek their own personal financial advice from their
financial adviser authorised under FSMA.
Dividends
The Board has announced a pre-liquidation interim dividend of
0.55 pence per Share which, subject to the Resolutions to be
proposed at the First General Meeting being passed, will be paid to
Shareholders prior to the Effective Date.
Shareholders receiving New HHI Shares under the Scheme will rank
fully for all dividends declared by Henderson High Income with a
record date falling after the date of the issue of those New HHI
Shares to them.
Overseas Shareholders
The attention of Overseas Shareholders is drawn to the paragraph
titled "Overseas Shareholders" in Part 3 of the Circular.
Overseas Shareholders are entitled to participate in the Scheme.
However, to the extent that HHI and/or the Liquidators and/or the
Directors, acting reasonably, consider that any issue of New HHI
Shares to an Overseas Shareholder would or may involve a breach of
the securities laws or regulations of any jurisdiction or may
violate any applicable legal or regulatory requirements or may
require Henderson High Income to become subject to additional
regulatory requirements (to which it would not be subject but for
such issue) and HHI and/or the Liquidators and/or the Directors, as
the case may be, have not been provided with evidence reasonably
satisfactory to them from the relevant Overseas Shareholder that
such Overseas Shareholder is permitted to hold New HHI Shares under
any relevant securities laws or regulations of such overseas
jurisdictions (or that HHI would not be subject to any additional
regulatory requirements to which it would not be subject but for
such issue), such Overseas Shareholder will be deemed to have
elected for the Cash Option in respect of their entire holding.
Expected Timetable
2024
Ex-dividend date for the pre-liquidation 4 January
interim dividend to Shareholders
Record date for the pre-liquidation interim 5 January
dividend to Shareholders
Latest time and date for receipt of Forms 11.00 a.m. on 4 January
of Proxy for the First General Meeting
First General Meeting 11.00 a.m. on 8 January
Latest time and date for receipt of Forms 1.00 p.m. on 8 January
of Election and/or TTE Instructions
Record Date for entitlements under the Scheme 6.00 p.m. on 8 January
Settlement of Shares disabled in CREST 6.00 p.m. on 8 January
Trading in the Shares on the London Stock 7.30 a.m. on 9 January
Exchange is suspended
Calculation Date market close on 10
January
Latest time and date for receipt of Forms 10.30 a.m. on 12 January
of Proxy for the Second General Meeting
Payment date for the pre-liquidation interim 15 January
dividend
Reclassification of the Shares (and commencement 8.00 a.m. on 15 January
of dealings in Reclassified Shares)
Suspension of listing of Reclassified Shares 7.30 a.m. on 16 January
and Company's Register closes
Second General Meeting 10.30 a.m. on 16
January
Effective Date for implementation of the 16 January
Scheme
Announcement of the results of Elections, 16 January
the Cash NAV per Share, the HDIV FAV per
Share and the HHI FAV per Share
CREST accounts credited with, and dealings 8.00 a.m. on 17 January
commence in, New HHI Shares
Share certificates in respect of New HHI week commencing 22
Shares despatched January
Cheques and electronic payments despatched week commencing 22
to Shareholders who elect for the Cash Option January
in accordance with their entitlements and
CREST accounts credited with cash
Cancellation of listing of Reclassified as soon as practicable
Shares after the Effective
Date
Note: All references to time in this announcement are to UK
time. Each of the times and dates in the above expected timetable
(other than in relation to the General Meetings) may be extended or
brought forward. If any of the above times and/or dates change, the
revised time(s) and/or date(s) will be notified to Shareholders by
an announcement through a Regulatory Information Service.
Defined terms used in this announcement shall, unless the
context requires otherwise, have the meanings ascribed to them in
the Circular.
The Circular has been submitted to the National Storage
Mechanism and will shortly be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the Company's website at https://www.janushenderson.com/en-gb/investor/product/henderson-diversified-income-trust-plc/ . The HHI Prospectus will also shortly be available on HHI's website https://www.janushenderson.com/combination-with-henderson-diversified-income-trust-plc/ .
For further information please contact:
Janus Henderson Investors UK
Limited +44 (0) 20 7818 4458
Dan Howe
J.P. Morgan Cazenove +44 (0) 20 3493 8000
William Simmonds
Rupert Budge
[1] Data to 30 November 2023 (being the latest practicable date
for this data).
20 year performance data based on ex income NAV (with debt at
fair value). Total return calculations assume dividend
reinvestment as at the ex-dividend date.
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