TIDMJMI
RNS Number : 3085T
JPMorgan UK Smaller Cos IT PLC
14 November 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
(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, 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.
14 November 2023
JPMorgan UK Smaller Companies Investment Trust plc
Legal Entity Identifier: 549300PXALXKUMU9JM18
Proposed combination with JPMorgan Mid Cap Investment Trust
plc
Introduction
The Board of JPMorgan UK Smaller Companies Investment Trust plc
("JMI" or the "Company") is pleased to announce that it has signed
Heads of Terms with the Board of JPMorgan Mid Cap Investment Trust
plc ("JMF") in respect of a proposed combination with JMF to be
effected by way of a section 110 scheme of reconstruction of JMF
(the "Scheme") and issuance of new ordinary shares of JMI as
consideration for the transfer of part of JMF's assets (together
with the Scheme, the " Transaction ").
Following the successful completion of the Transaction, the
enlarged JMI shall continue to be managed by JPMorgan Funds Limited
("JPMorgan"), with Georgina Brittain and Katen Patel as lead
portfolio managers, and the Company shall pursue its existing
investment objective and policy.
The Board believes that the Transaction will enable JMI's
existing ordinary shareholders to benefit from continued exposure
to the UK Smaller companies investment strategy, the greater
economies of scale that are expected to result from the enlarged
asset base, including cost efficiencies and greater liquidity in
JMI's ordinary shares.
As part of the Transaction, the Board has also agreed the
following changes:
- an enhanced dividend policy targeting a 4 per cent. yield on
NAV per annum, calculated on the basis of 4 per cent. of NAV as at
the end of the preceding financial year, payable in equal quarterly
instalments;
- lower management fees: to be 0.65 per cent. p.a. on JMI's net
assets up to GBP200 million and 0.55 per cent. p.a. on net assets
above GBP200 million (currently 0.65 per cent. p.a. on JMI's net
assets up to GBP300 million and 0.55 per cent. p.a. on net assets
above GBP300 million);
- Significant cost contribution from JPMorgan by way of fee waiver;
- the enlarged JMI will be renamed JPMorgan UK Small Cap Growth
& Income plc, with JUGI as the new ticker; and
- three directors from JMF will join the Board. It is intended
that one of the former JMF directors will step down at, or prior
to, the 2024 AGM.
The documentation in connection with the Transaction is expected
to be published in January 2024 with a view to convening EGMs and
completing the Transaction in February 2024.
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 Transaction. The Transaction will,
amongst other things, be subject to the approval by the
shareholders of each of JMI and JMF, in addition to necessary
regulatory and tax approvals.
Summary of the Scheme
The Transaction will be effected by way of a scheme of
reconstruction of JMF under section 110 of the Insolvency Act 1986,
resulting in the voluntary liquidation of JMF and the transfer of
part of JMF's assets to JMI in exchange for the issue of new
ordinary shares of JMI (" New JMI Ordinary Shares ") to existing
JMF shareholders (" JMF Shareholders "). The number of New Ordinary
Shares issued to JMF Shareholders will be determined on a Formula
Asset Value ("FAV") for FAV basis. The FAVs shall be calculated
based on the net asset value of each of JMI and JMF on an agreed
calculation date, less each party's transaction costs.
Subject to, and conditional on, the Scheme becoming
unconditional in all material respects and the Transaction
completing successfully, JMF Shareholders will have the option to
elect to receive a cash distribution (the "JMF Cash Option") which,
on an aggregate basis will be limited to 15 per cent. of the JMF
ordinary shares in issue (excluding treasury shares). Should total
elections for the JMF Cash Option exceed 15 per cent. of JMF's
shares in issue (excluding treasury shares), excess elections for
the JMF Cash Option will be scaled back into New JMI Ordinary
Shares on a pro rata basis.
The Cash Option will be offered at a discount of 2 per cent. to
the JMF FAV (the "Cash Discount") less the costs of realising the
assets allocated to the cash pool. The Cash Discount will be for
the benefit of the enlarged JMI.
The assets subject to the Cash Option will be segregated from,
and treated as separate to, the assets to be transferred to JMI
pursuant to the Scheme.
Benefits of the Scheme
The board of directors of both JMI and JMF believe that the
Scheme has a strong rationale, which includes the following
benefits:
-- Scale: The enlarged JMI is expected to have net assets in
excess of GBP430 million [1] , creating a leading investment
vehicle for UK smaller companies that provides exposure to fast
growing, innovative companies that help drive the UK domestic
economy and an attractive dividend yield. The scale of the enlarged
company should improve secondary market liquidity for JMI's
shareholders and will allow for cost efficiencies;
-- Lower Management Fee: Following completion of the
Transaction, JPMorgan has agreed to reduce the management fee
payable by the enlarged JMI from the current 0.65 per cent. p.a. on
JMI's net assets up to GBP300 million and 0.55 per cent. p.a. on
net assets above GBP300 million to the revised 0.65 per cent. p.a.
on JMI's net assets up to GBP200 million and 0.55 per cent. p.a. on
net assets above GBP200 million (the " New Management Fee ");
-- Lower ongoing charges: Existing and new shareholders in JMI
will benefit from an ongoing expense ratio reduction of c.20bps
compared to the last financial year as a result of both JMI's fixed
costs being spread over a larger asset base and the recent and
proposed management fee changes;
-- Contribution to costs: As described below, JPMorgan has
agreed to make a significant cost contribution in respect of the
Transaction by way of fee waiver, which is expected to offset some
of the direct transaction costs for JMI shareholders;
-- Three year continuation vote: The enlarged JMI will retain
JMI's existing continuation vote which is put to shareholders every
three years; and
-- Shareholder diversification: The Transaction will allow a
number of shareholders to consolidate their holdings across the two
companies while also creating a more diverse shareholder base.
Costs of the Transaction
Each company will bear its own costs in respect of the
Transaction which will be reflected in the FAV for each
company.
For the avoidance of doubt, any costs of realignment or
realisation of the JMF portfolio prior to the Scheme becoming
effective, any stamp duty, stamp duty reserve tax or other
transaction tax, or investment costs incurred by JMI for the
acquisition of the JMF portfolio or the deployment of the cash
therein upon receipt shall be borne by the enlarged JMI, including
the London Stock Exchange admission fees.
JPMorgan Cost Contribution
JPMorgan has proposed a contribution to the costs of the
Transaction in the form of a fee waiver, being six months of the
New Management Fee payable by the enlarged JMI in respect of the
net asset value of the assets transferred from JMF to JMI under the
Scheme ("Cost Contribution").
The net asset value of the assets transferred under the Scheme
are currently estimated to be approximately GBP208 million [2]
.
The Cost Contribution will be for the benefit of the
shareholders of the enlarged JMI.
Expected timetable
It is intended that the documentation in connection with the
Transaction will be posted to shareholders in January 2024, with a
view to convening general meetings in February 2024. The latest
date for the Scheme to be determined to be unconditional is 31
March 2024, unless extended by mutual agreement of JMI and JMF.
The Chairman of JMI, Andrew Impey, commented:
"Your Board believes that there is a strong case for long-term
investment in UK smaller companies. The valuations are attractive
in absolute and relative terms, the outlook remains favourable,
despite some near term challenges, and the Company provides access
to investments in a controlled risk environment that individual
investors would find difficult to replicate on their own. The
Company's NAV total return has outperformed the benchmark over one,
three, five and ten years.
The proposed combination with JPMorgan Mid Cap Investment Trust
plc will enhance this opportunity and create a larger, more liquid
investment trust but still allow both sets of shareholders to
benefit from JPMorgan's expertise and track record in investing in
this exciting area of the UK market. Both Boards believe that
shareholders will benefit from the reduction in costs, contributing
to the good potential for capital growth, and the new enhanced
dividend policy, which will allow them to benefit from an
attractive yield."
For further information please contact:
JPMorgan UK Smaller Companies Investment Contact via Company Secretary
Trust plc
Andrew Impey
JPMorgan Funds Limited
Simon Crinage
Fin Bodman +44 (0) 20 7742 4000
JPMorgan Funds Limited (Company Secretary) +44 (0) 20 7742 4000
Panmure Gordon (UK) Limited
Alex Collins +44 (0) 20 7886 2767
Sapna Shah +44 (0) 20 7886 2783
Important Information
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). The person responsible for arranging for the
release of this announcement on behalf of JPMorgan UK Smaller
Companies Investment Trust plc is Lucy Dina of JPMorgan Funds
Limited.
[1] Based on the latest estimated NAV as at 10 November 2023 of
each of JMI and JMF and assuming no take up of the Cash Option.
[2] Based on the latest estimated NAV as at 10 November 2023 and
assuming no take up of the JMF Cash Option..
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END
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