The Lemon Fool

Afternoon All.

Just saw this

https://citywire.com/investment-trust-insider/news/henderson-diversified-income-plans-merger-with-henderson-peer-as-strategy-fails/a2427254?re=113403&refea=1498852

"Consolidation within the investment company industry continues as the boards of Henderson High Income (HHI) and Henderson Diversified Income (HDIV) have proposed their combination, with the latter saying the economic conditions have made its strategy unsustainable.

Under the terms announced on 4 October, the £145m HDIV will wind up, with its cash and assets transferred to HHI on a formula asset value (FAV) for FAV basis, which is the companies’ net asset values (NAV) but taking into account merger costs and any dividends declared but not paid prior to the calculation date.

Shareholders in Diversified Income will be able to opt for new shares in the £262m High Income trust run by David Smith or a full or partial cash exit. The cash option will be offered at a 1% discount to HDIV’s NAV, while shareholders who choose HHI shares will be given them at a 1% premium to HHI’s FAV.

..."

Another one bites the dust

I'm not staying with HHI, so need to figure out what to do with the proceeds.

Regards, Newroad

BIPS?

These very small trusts cannot survive and anyway there are far too many of them.

Dod

HHI is a bit like a pseudo HYP and has a reasonable yield. Not only that, but it seems to have preserved capital better than HDIV over 10 years.

You no doubt have the feeling it does not fit in with your investments (not diverse?) but I'd probably sit on it for a while if I could not think of anything better.

I did the same with PLI when it was merged with IVPU - and I'm still sitting on it a year or more later!

Arb.

Hi Arb.

Yes, if I were looking for a fire'n'forget Pseudo-HYP proxy or similar, HHI would fit the bill. However, this is part of my two of our main portfolios - and I would like it to continue to be actively managed debt and loans.

As MattMan74 notes, BIPS is the obvious alternative, but that's what we have in the others (and only that because two others merged before) so it starts to become a specific risk. However, it may be the least bad alternative.

That said, the imminent merger with a cash exit option (NAV - 1%) has pushed the price up, which in the short term is a good thing.

Regards, Newroad

Evening, All.

On this matter, we've just been advised that we need to "elect" (via II in our case) what we wish to do as a consequence of the merger.

There are two options

1. The "Rollover" option, which is the default - convert HDIV to new HHI shares
2. The "Cash" option, which requires a positive election/decision

You can mix the two (you just need to say how many shares of each). Some key points to note ...

With the rollover option, the new HHI shares are (IMO) likely to be purchased above market price (though there are at least partial mitigations to this). From the circular

"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)."

With the cash option, there is a 1% haircut from NAV. Also from the circular

"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."

In effect, I understand the 1% haircut for cash option takers goes into the pool for rollover option takers. However, it's more complex than that - one needs to read the circular in detail to understand it fully (I'm not going to try and explain it here, even if I do understand it): https://www.londonstockexchange.com/news-article/HDIV/publication-of-circular/16249281

I imagine there are a few TLF holders of HDIV - good luck with your choice. My thinking along with some other stuff can be found on this related thread: https://www.lemonfool.co.uk/viewtopic.php?f=52&t=40910&p=619341&hilit=hdiv#p619341

Regards, Newroad

Afternoon All.

The latest on this matter

https://markets.ft.com/data/announce/detail?dockey=1323-16274700-42K775C2BP2RKQC6D0HBA400OI

Note the likely suspension of trading of HDIV shares - from 16th to 19th Jan as I read it.

Regards, Newroad

Thank you for the update Newroad

Morning All.

The votes are in and it's going through - details here

https://markets.ft.com/data/announce/detail?dockey=1323-16291336-4NJ8TVCM1MJA928L79A8PBE7G8

Key information:

"As at the Calculation Date the entitlements calculated in accordance with the terms of the Scheme were as follows:


· HDIV FAV per Share: 72.055120 pence
· Cash NAV per Share: 71.080106 pence
· HHI FAV per Share: 170.245412 pence

Therefore, Shareholders will receive the following cash and/or number of New HHI Shares.

For Shareholders that elected (or are deemed to have elected) to receive New HHI Shares:


· each Reclassified Share with "A" rights attached to it will receive 0.423242 New HHI Shares.

Fractional entitlements to New HHI Shares will not be issued under the Scheme and entitlements will be rounded down to the nearest whole number. No cash payment will be made or returned in respect of any fractional entitlements, which will be retained for the benefit of HHI.

For Shareholders that elected for the Cash Option:


· each Reclassified Share with "B" rights attached to it will receive 71.080106 pence in cash."

My bold above for the one that most affects our holdings.

Regards, Newroad

no cash recd into my ii ISA ?

Nor me yet, Dubre.

II are fairly good with normal dividends etc. This one being atypical, it may require some manual intervention - or at the very least, checking.

Also, the company (HDIV) and its liquidators said this week. In effect, they could send the money as late as today without breaching that commitment, so maybe brokers will then distribute it within the nominee accounts early next week.

Regards, Newroad

UPDATE: Just arrived in my account near/post market close today

Also arrived in iWeb today

Mine also. Thanks everybody.
Now....to decide where to reinvest.