BH Macro and BH Global agree heads of terms for proposed merger – The boards of BH Macro and BH Global, and Brevan Howard Capital Management LP, the manager of both BH Macro and BH Global, have agreed heads of terms in respect of the proposed combination of BHMG with BHGG.
The combination will be effected by way of a ‘scheme of reconstruction’ of BH Global which will see BH Macro as the continuing entity which will continue to follow its existing investment policy solely as a feeder fund into Brevan Howard Master Fund. The scheme will be subject to the approval of BH Global’s shareholders, though it has been confirmed that the largest shareholder of both trusts (Investec Wealth & Invested) have signalled their support in principle for the combination – which we covered earlier this year.
Under the Scheme, BH Global shareholders will be offered the option of exchanging their shares for shares of the same currency class of BH Macro or to receive a cash payment. The scheme will replace the proposed tender offer previously announced by BH Global for up to 40% of each class of its shares in issue (excluding treasury shares).
BH Macro will proceed with its tender offer for up to 40% of its shares of each class in issue (excluding treasury shares) on the basis previously announced. The company’s tender offer will be completed before the scheme is implemented.
The board of BH Macro believes its shareholders should benefit from the combination on the basis that, subject also to the outcome of its tender offer, the trust should grow and allow its fixed costs to be spread over a larger cost base, alongside improving liquidity and aiding marketing in respect of BHMG’s shares.
Pursuant to the Scheme, BH Global shareholders will (subject to any applicable regulatory restrictions) be given the option to elect to receive in place of their existing shares:
- Share alternative: BHMG shares of the same currency class and with the same value on the basis of the relative NAVs per share of the relevant class of each company on the effective date of the combination; or
- Cash alternative: A cash amount equal to 97.8% of the NAV per share of each BHGG share held at the effective date of the combination
These figures will not include the costs of the combination and the BH Macro figures will not include any uplift that may otherwise have been created by its tender offer. BH Global shareholders electing for the cash alternative will also receive an additional amount per share to offset the impact of the increase of its management fee effective from 1 July 2021.
The assets of BH Global attributable to shares for which share alternative elections are made will be transferred to BH Macro for investment in the Master Fund. Any other assets remaining after payment of the cash alternative and the liabilities and costs of BH Global’s liquidation will also be transferred to BH Macro, subject to an agreed retention being made by the liquidators in respect of any unknown or unascertainable liabilities of the trust.
BH Global will pay any costs of the combination out of its assets which represent the difference between the payments made in respect of cash alternative elections and the net asset value of the shares in respect of which those elections were made. BH Macro has also agreed to make a contribution to BH Global to cover any shortfall if such assets prove insufficient to meet its budgeted costs.
BH Macro will meet its costs of the combination from the uplift delivered from its tender offer and any assets transferred from the trust in excess of those that are invested in the Master Fund in respect of shares issued pursuant to the share alternative. Meanwhile, Brevan Howard has agreed to make a contribution to BH Macro in respect of its costs of the combination if required to help ensure it is not NAV dilutive for continuing shareholders.
Expected timetables
Subject to the receipt of applicable regulatory and tax approvals, it is expected that documentation regarding the combination will be sent to BH Global shareholders by the end of June and, subject to shareholder approval being obtained, the combination will be effected prior to the end of August on the basis of both trust’s respective July 2021 month end NAVs.
A circular in respect of the BH Macro tender offer will be sent to relevant shareholders shortly, with the tender period being open during June 2021, the tender prices being calculated by reference to the June month end NAVs and the tender consideration being paid prior to the end of July .
BHMG : BHGG : BH Macro and BH Global agree heads of terms for proposed combination