Alliance Trust (ATST) and WTAN have published circulars in relation to their proposed merger, which, if it proceeds, will see a voluntary winding-up of Witan with its assets rolled into ATST, with the combined entity to be renamed Alliance Witan Plc (you can see our coverage of the original announcement here). The details announced with the circulars align with the details previously released, although there is now greater clarity of the costs associated with the transaction – see below. To recap, Witan ordinary shareholders can elect to rollover their holding and receive new ATST shares and/or cash (subject to an overall limit of 17.5 per cent. of the ordinary shares), although the cash option will be offered at a discount of 2.5 per cent. to the WTAN NAV per share. Both Witan and ATST invest for capital growth and income in diversified portfolios of global equities, and there is a similarity of overall approach stemming from their respective multi-manager strategies.
Cost contribution from ATST’s manager Willis Towers Watson (WTW)
WTW has agreed to make a significant contribution to the costs of the transaction. As previously discussed, WTW’s contribution will be applied initially to offset ATST’s costs of implementing the transaction, with any excess applied firstly to offset any remaining Witan implementation costs, and then accruing for the benefit of shareholders in the enlarged ATST. This contribution, when combined with the benefit of the discount on the cash exit, means that Witan ordinary shareholders who roll over into ATST are expected to suffer minimal or no dilution, depending upon the level of take-up of the cash option.
Witan’s implementation costs are estimated to be approximately £6.0m (including irrecoverable VAT), prior to taking into account the application of the cash uplift WTW contribution. However, Witan’s net implementation costs are expected to be nil after taking into account the estimated cash uplift (assuming full participation by shareholders under the cash option and no dissenting shareholders). Unlike Witan, ATST’s announcement doesn’t say what its implementation costs are, so we aren’t able to comment on them here.
WTW has agreed to make this contribution by way of a waiver of part of the ongoing management fee payable by ATST, equal to 0.52375 per cent. of the assets to be transferred by Witan to ATST under the scheme (excluding the value attributable to the WTW contribution). The financial value of the WTW contribution will be satisfied by WTW by means of a partial waiver of its fees payable by the enlarged ATST over a period of no more than 12 months following completion of the scheme.
The financial value of the WTW contribution is estimated at approximately £7.1m based on the estimated unaudited net asset value of the assets to be transferred to ATST as at 6 September 2024, assuming full participation by Witan ordinary shareholders under the cash option and no dissenting shareholders. Since the WTW contribution is a fee waiver within the enlarged ATST rather than a cash payment, any benefit of the WTW contribution accruing to the company will be reflected in an upwards adjustment to the WTAN FAV.
The WTW contribution is subject to a clawback provision such that, in the event of the termination of WTW’s appointment as AIFM and investment manager to enlarged ATST on a no-fault basis within 36 months of the effective date, WTW will be entitled to claim back some or all of the WTW contribution from the enlarged ATST. All of the WTW contribution will be subject to clawback in the event of such termination occurring within 12 months of the effective date; two thirds of the WTW contribution will be subject to clawback in the event of such termination occurring between 12 and 24 months of the effective date; and one third of the WTW contribution will be subject to clawback in the event of such termination occurring after more than 24 months (but less than 36 months) of the effective date.
General meetings
The implementation of the transaction requires approval of Witan shareholders at a separate class meeting of ordinary shareholders and two general meetings. The ordinary shareholders’ class meeting and the general meetings will be held at the offices of Herbert Smith Freehills LLP, Exchange House, Primrose Street, London EC2A 2EG. Only ordinary shareholders are entitled to attend and vote at the ordinary shareholders’ class meeting, which will be held at 11.00 a.m. on 30 September 2024. All shareholders are entitled to attend the first general meeting, which will be held at 11.30 a.m. on 30 September 2024, but only ordinary shareholders are entitled to vote. All shareholders are entitled to attend and vote at the second general meeting, which will be held at 9.30 a.m. on 9 October 2024.
ATST is holding its general meeting at 11.00am on Tuesday, 1 October 2024 at the Apex City Quay Hotel & Spa, 1 West Victoria Dock Road, Dundee DD1 3JP.