Invesco Asia Trust Plc - Combination with Asia Dragon Trust plc
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 , AUSTRALIA , CANADA , JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY JURISDICTION FOR WHICH THE SAME COULD BE UNLAWFUL
.
This announcement is not an offer to sell, or a solicitation of an offer to acquire, securities in
The information communicated in this announcement is deemed to constitute inside information for the purposes of Article 7 of the
Legal Entity Identifier: 549300YM9USHRKIET173
Combination with Asia Dragon Trust plc
Transaction highlights
-- Transfer of certain of Asia Dragon’s assets to Invesco Asia in exchange
for issue of new ordinary shares in Invesco Asia (to be renamed Invesco
Asia Dragon Trust plc ) through a scheme of reconstruction and winding-up
of Asia Dragon under section 110 Insolvency Act 1986.
-- Invesco Asia’s investment strategy, which seeks to identify undervalued
Asian and Australasian companies and has an emphasis on total return, is
to remain unchanged.
-- Introduction of a new competitive management fee structure for Invesco
Asia Dragon, coupled with the greater economies of scale on an enlarged
portfolio of more than £800m, will allow the Company to target an
Ongoing Charges Ratio of less than 70bps in future financial years.
-- Invesco Asia will maintain its current policy of paying an annual
dividend equal to 4.0 per cent. of its NAV, and move from semi-annual to
quarterly dividend payments.
-- Combined vehicle to offer improved secondary market liquidity, and
expected eligibility for inclusion in FTSE 250 Index in due course.
-- Invesco Asia’s investment manager, Invesco Fund Managers Limited , to
make a significant contribution to help absorb direct transaction costs.
Invesco Asia shareholders will not suffer any Net Asset Value dilution
from the direct costs of a successful transaction.
-- Asia Dragon shareholders will have the option of a partial cash exit for
up to 25% of Asia Dragon’s issued share capital in aggregate at a 2%
discount to Asia Dragon’s FAV per Share.
-- Introduction of triennial unconditional tender offers for up to 100 per
cent. of issued share capital at a 4.0 per cent. discount to prevailing
NAV, with the first tender expected to be put forward in 2028.
-- Shareholder meetings expected to be held by early February 2025 with the
Transaction completing shortly thereafter.
“This combination is transformational for the Company and both sets of shareholders. For Asia Dragon’s shareholders, it gives continuity of mandate with a very strong investment house, proven and experienced managers, a repeatable investment process and a fantastic long-term performance record. For our own shareholders, apart from the lower fees and greater liquidity, it brings the scale to add to our existing buy ratings that will spur future growth. Our proposed discount management policy is bold, and provides the opportunity for us to break free from the persistent discounts and locked registers from which so many Asian and Emerging Markets trusts have suffered. Our aim is to make this the go-to Asian trust, trading on a premium rating, growing organically and also through further combinations.”
"This comes at an exciting moment to invest in
Introduction
The Board of
The combination will be undertaken through a scheme of reconstruction and winding-up of Asia Dragon under section 110 of the Insolvency Act 1986 (the “
Scheme
”), and the associated transfer of certain of Asia Dragon’s assets to the Company in exchange for the issue of new ordinary shares in
Benefits of the Combination
The combination is expected to result in substantial benefits for
-- Continued access to the market leading resources of Invesco: Invesco, a
global asset manager with US$1.8 trillion of AUM, including US$15.9
billion in Asia and EM Equities (as at 30 September 2024 ), will remain
as the investment manager of the combined Invesco Asia Dragon. Invesco
Asia will continue to benefit from the expertise of its Co-Portfolio
Managers, Fiona Yang and Ian Hargreaves , and from the depth of resource
and experience offered by the wider Asian & Emerging Markets Equities
Team.
-- Strong investment performance track record: Invesco Asia’s long-term
performance record is strong, with NAV total returns of 14.3%, 49.4% and
153.7% over three, five and ten years respectively (to 30 September
2024 ), outperforming the Company’s benchmark[1] total returns of 2.4%,
26.2% and 99.4% over the corresponding periods.
-- Larger scale and FTSE 250 inclusion:Invesco Asia Dragon is expected to
have net assets of more than £800 million on completion of the
Transaction (based on the last published net asset values of the two
companies as at the date of this announcement). It is also expected that
Invesco Asia Dragon will be eligible for inclusion in the FTSE 250 Index
and will benefit from improved secondary market liquidity.
-- Lower management fees:The Invesco Asia Board and IFML have agreed a new
management fee structure for Invesco Asia Dragon (see further below)
which will result in a more competitive blended fee rate for the
combined entity and its shareholders than is currently afforded to
Invesco Asia’s and Asia Dragon's respective shareholders.
-- Lower ongoing charges: The new reduced management fee structure and the
economies of scale which the combination will bring will allow Invesco
Asia Dragon to target an ongoing charges basis points ratio of less than
70bps in future financial years[2], a material improvement on Invesco
Asia's current ongoing charge ratio of 103bps.
-- Increased frequency of dividend payments: Invesco Asia will maintain its
current policy of paying an annual dividend equal to 4 per cent. of its
NAV; but will increase the frequency of its dividend payments from the
current half-yearly basis (2 per cent. in each of November and April) to
a quarterly basis (four equal dividends of 1 per cent. each every three
months).
-- Significant contribution to costs from IFML:IFML has agreed to make a
significant contribution to the costs of the Transaction. The value of
the contribution will be applied initially to meet Invesco Asia’s direct
transaction costs, meaning that Invesco Asia shareholders will suffer no
Net Asset Value dilution from the direct costs of the Transaction, with
any excess applied for the benefit of all shareholders in the combined
Invesco Asia Dragon.
-- Unconditional tender offers: The introduction of unconditional tender
offers every three years for up to 100% of the issued share capital of
the enlarged vehicle, replacing the continuation votes and
performance-related conditional tender offers currently utilised by
Invesco Asia , provides the Invesco Asia Board with a strong discount
management tool; and at the same time it constitutes an effective and
attractive initiative for shareholders and potential new investors
alike, unlocking the ability to buy and hold shares in the Company with
the certainty that the size of their shareholding can be adjusted
periodically thereafter, regardless of relative performance or share
rating.
[1]
The benchmark index of the Company was changed on
[2]
Based upon the last published net asset values of
The Transaction
Overview
The combination will be implemented through a scheme of reconstruction pursuant to section 110 of the Insolvency Act 1986, resulting in the voluntary liquidation of Asia Dragon and the transfer of certain of its assets
(consisting of investments which are in accordance with
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 be subject to,
inter alia
, the approval of
Subject to, and conditional on, the Scheme becoming unconditional and the Transaction completing successfully, qualifying Asia Dragon shareholders will be entitled to elect to receive in respect of some, or all, of their Asia Dragon shares:
(i) New Invesco Asia Shares; and/or
(ii) a cash distribution (the " Cash Option ") which, on an aggregate basis will be limited to 25 per cent. of Asia Dragon's shares in issue (excluding treasury shares). Should total elections for the Cash Option exceed 25 per cent. of Asia Dragon's shares in issue (excluding treasury shares), excess elections for the Cash Option will be scaled back on a pro rata basis.
New Invesco Asia Shares will be issued as the default option under the Scheme in the event that Asia Dragon shareholders do not make a valid election under the Scheme or only elect for the Cash Option in respect of a proportion of their shares, or to the extent elections for the Cash Option are scaled back as a result of the Cash Option being oversubscribed.
The Cash Option will be offered at a discount of 2 per cent. to the Asia Dragon Formula Asset Value (“ FAV ”) per Share (the " Cash Discount "). The Asia Dragon FAV will be the NAV of Asia Dragon as at the calculation date for the Scheme adjusted for the liquidators’ retention, dividends declared but unpaid (if applicable) and any costs of the Transaction not already accrued.
Conditional on completion of the Transaction and with effect from the effective date of the Scheme, the Invesco Asia Board has agreed with IFML a reduction in the management fee payable by
Each company will bear its own costs in relation to the Transaction. The benefit of the IFML Costs Contribution will be first applied to Invesco Asia’s direct transaction costs, with any amount remaining thereafter being for the benefit of all shareholders in Invesco Asia Dragon, through an offset against management fees incurred following the Transaction. The benefit of the discount on the Cash Option will be first applied to Asia Dragon’s direct transactional costs, with any excess remaining thereafter again being applied for the benefit of all shareholders in Invesco Asia Dragon.
New Invesco Asia Shares will be issued to Asia Dragon shareholders on a Rollover FAV-to-FAV per share basis. Invesco Asia’s FAV will be its net asset value as at the calculation date for the Scheme, adjusted for any costs of the Transaction not already accrued, the allocation of the benefit of the IFML Costs Contribution to meet its direct transaction costs, and any dividends and distributions declared but unpaid as at the date of the FAV calculation. Asia Dragon’s Rollover FAV will be its FAV (as described above) adjusted for the allocation of the Cash Discount to meet its direct transaction costs.
Dividends
Invesco Asia Dragon will maintain its current policy of paying an aggregate annual dividend equal to 4 per cent. of its NAV; but will increase the frequency of its dividend payments from the current half-yearly basis (2 per cent. in each of November and April) to a quarterly basis (1 per cent. every three months).
It is the intention of the Invesco Asia Board to pay a dividend of 7.80p per ordinary share (being 2 per cent. of the NAV per share as at
The date by reference to which the 4 per cent. figure is calculated will also be changed, from the last business day in September to the last business day in April of each year.
New Management Fee Structure
As part of the Transaction, and conditional upon the Transaction being implemented, the Invesco Asia Board and IFML have agreed a new competitive management fee structure pursuant to which IFML will be paid an annual fee for its management services to Invesco Asia Dragon, calculated on a monthly basis, as follows:
- 0.75% on the first £125 million of Invesco Asia Dragon’s net asset value;
- 0.60% on Invesco Asia Dragon’s net asset value over £125 million and up to £450 million; and
- 0.50% on Invesco Asia Dragon’s net asset value in excess of £450 million.
The new management fee structure will apply immediately upon completion of the Transaction.
Invesco Asia Dragon Board
Following completion of the Transaction, the Invesco Asia Dragon Board will be enlarged by a number of members of the Asia Dragon Board joining the four directors already on the Board of
Introduction of Unconditional Tender Offers
Following completion of the Transaction, Invesco Asia Dragon will introduce (in place of the current three-yearly continuation votes and five-yearly performance-related conditional tender offers) triennial unconditional tender offers for up to 100 per cent. of Invesco Asia Dragon’s issued share capital at a 4 per cent. discount to prevailing NAV (debt at fair value, cum income) (the “ Unconditional Tender Offers ”). The first Unconditional Tender Offer is expected to be put forward to Invesco Asia Dragon shareholders in 2028.
If any Unconditional Tender Offer were to result in Invesco Asia Dragon’s net asset value falling below any minimum size condition established by the Board in connection with that Unconditional Tender Offer, the Invesco Asia Dragon Board would consult with major shareholders on the future of Invesco Asia Dragon and, if appropriate, put forward proposals for a strategic review of the options for the Company's future and/or for the Company's reconstruction, reorganisation or winding-up.
Share Buyback Policy
Following completion of the Transaction, Invesco Asia Dragon will maintain Invesco Asia’s stated average discount target of less than 10 per cent. of NAV (calculated on a cum-income basis) over each financial year. Share buybacks will continue to be undertaken where the Invesco Asia Dragon Board considers that such buybacks will be effective, taking into account market factors and the discounts of comparable investment companies, and having regard to the greater latitude afforded to Invesco Asia Dragon with its increased size following completion of the Transaction.
Change of
It is intended that
Shareholder Support
Asia Dragon and
Expected Timetable
It is anticipated that documentation in connection with the Transaction will be posted to shareholders by
Overseas Shareholders
Save where an Asia Dragon shareholder provides appropriate evidence to
Enquiries
Invesco Asia plc
Via Invesco Asset Management Limited
Neil Rogan , Chairman
Invesco Fund Managers Limited
(Manager, Invesco Asia ) 020 7543 3500
Will Ellis /John Armstrong-Denby Invesco Asset Management Limited
(Company Secretary, Invesco Asia ) 020 7543 3591/020 7543 3559
Naomi Rogers /James Poole Investec Bank plc (Financial Adviser,
Sponsor and Corporate Broker to Invesco
Asia ) 020 7597 4000
David Yovichic/Denis Flanagan
Important Information
The information in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. The material contained in this announcement is given as at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment. In particular, any proposals referred to herein are subject to revision and amendment.
The New Invesco Asia Shares have not been, and will not be, registered under the
The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. Figures refer to past performance and past performance should not be considered a reliable indicator of future results. Returns may increase or decrease as a result of currency fluctuations.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "might", "will" or "should" or, in each case, their negative or other variations or similar expressions. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding
Forward-looking statements are subject to risks and uncertainties and, accordingly, Invesco Asia’s or Asia Dragon’s actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These forward-looking statements speak only as at the date of this announcement and cannot be relied upon as a guide to future performance. Subject to their respective legal and regulatory obligations, each of
None of
