City Merchants High Yield (CMHY) has announced that it has signed heads of terms with the board of Invesco Enhanced Income (IPE) in respect of a proposed merger with IPE It is proposed that the enlarged entity will be renamed Invesco Bond Income Plus, which based on the existing net assets of CMHY and IPE, would have net assets in excess of £300m. The current fund manager of both CMHY and IPE, Rhys Davies, will continue as the fund manager of BIPS.
CMHY’s board notes that the proposals will enable CMHY shareholders to benefit from the greater economies of scale that are expected to result from the enlarged asset base of BIPS.
Proposed benefits to CMHY Shareholders
The announcement made note of the following proposed benefits for CMHY’s shareholders:
- “Greater scale through the combination of similar investment portfolios: CMHY and IPE are managed by the same fund management company and investment manager and with a similar investment style. Rhys Davies currently manages both companies with a good track record and does so with a similar investment objective of high income and a focus on high-yield fixed-interest securities. There is a high degree of overlap between the two investment portfolios.
- Lower management fee arrangements: In connection with the Proposals, it has been agreed with Invesco Fund Managers Limited (“IFML”) that the management fee will be reduced to an annual amount equal to 0.65 per cent of the total assets less current liabilities to reflect the larger size of BIPS. This is a reduction from the current annual management fee payable by CMHY of 0.75 per cent of total assets less current liabilities.
- Lower ongoing charges: In addition to lower management fees, the other costs of BIPS will be spread across a larger asset base resulting in further economies of scale and a reduction on ongoing charges.
- Improved liquidity: The Board expects that the enlarged entity will benefit from greater liquidity in its shares.
- Potential for strong share price rating: The Board believes that the above benefits should assist the shares in maintaining a strong rating as the greater scale of BIPS is expected to result in broader market appeal.
The Proposals will be subject to the approval by the shareholders of both CMHY and IPE in addition to regulatory and tax approvals. A timetable and further details of the Proposals will be announced in due course.”
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CMHY/IPE: City Merchants High Yield and Invesco Enhanced Income sign heads of terms on proposed merger