Henderson eurotrust makes unsolicited bid for charter european trust with merger plans
Henderson Global Investors has made an unsolicited approach to the board of the Charter European Trust proposing to merge the trust with Henderson Eurotrust and replace Dresdner RCM as the manager.
On behalf of 29.2% of Charter's shareholders, Henderson has requisitioned an EGM of the trust to vote on the removal of members of the current board and to replace them with Preston Rabi, Tim Sinclair and George Kershaw.
If this proposal is approved, the new board intends to merge the £59.3m Henderson Eurotrust, a split capital trust with ordinary shares and zeros, with the £432.2m Charter European Trust. Simultaneously the board would propose a 75% cash exit opportunity to ordinary shareholders in both companies, thereby creating an investment trust with assets of around £100m.
The merged trust would be run in the same way as the Henderson Eurotrust, managed by Tim Stevenson. It would invest in medium/large continental European companies.
This is different to the investment mandate of Charter European, managed by Juliet Cohn, which invests in pan-European large- cap companies and is very growth orientated.
If the proposals are accepted, Henderson would act as the interim manager of Charter European to realign the assets of the trust in preparation for implementing the scheme.
The scheme, which requires the approval of both sets of shareholders, will provide ordinary shareholders with three options, elect to go into the new investment trust, elect for class A accumulation shares in the Henderson European Capital Growth Fund Oeic, and/or elect for 75% of their investment to be returned in cash.
For Hendersons, this new trust would provide an ideal vehicle to roll over the Eurotrust into when it winds up on 31 October 2002.
An EGM for shareholders has to be held by 5 March 2002, and if implemented, it is intended that the proposals will be completed during the first half of 2002.
However Simon White, head of investment trusts at Dresdner, argued that although Charter European has suffered this past year due to its growth strategy, over the long-term it has delivered good performance. White said: 'Now is not the time to jump out of a pan-European growth strategy as you risk missing out on the upside. What Hendersons is asking is for the trust's 10,000 individual shareholders to move to a completely different asset class.'
Charles Cade, analyst at HSBC, said these developments draw similarities to those in late 1996, when TR European Growth bid for Kleinwort European Privatisation (Kepit).
Cade said: 'That bid ultimately failed because the board of Kepit 'threw in the towel' and wound up the fund with lower expenses than would have been incurred through the bid.
'This time, we believe that Hendersons' proposals have more chance of succeeding. It has the support of major institutional shareholders and the remainder of the share capital is widely spread among private client groups, retail investors and index trackers.'
Cade said that Dresdner will put forward the argument that the scheme will be costly for shareholders and that the mandate of the new fund will be different. However, he said that it is in HSBC's belief that the odds are stacked against Dresdner given the recent track records of the two funds.
Think tank report
Number of benefits
Alongside Barrett, Hopkins, Boston and Thorman on 17 October
For undisclosed sum