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- Ashoka WhiteOak Emerging Markets announces proposed transaction with the Asia Dragon Trust
Ashoka WhiteOak Emerging Markets (AWEM) has announced a proposed transaction with the Asia Dragon Trust (DGN). The proposal is supported in principle by a majority of DGN shareholders, with the company highlighting the opportunity for Asia Dragon shareholders to join an outperforming investment trust, with market-leading structural features, zero management fee and an annual redemption facility. Notably, the deal included a cash exit of up to 50% for Asia Dragon shareholders.
Regarding the deal, chair of AWEM commented:
“We have always sought as a company to put the interests of shareholders first, for example through our market-leading, shareholder-friendly structures. We believe this is the primary obligation of a truly independent board. We have listened to clear feedback from a majority of Asia Dragon shareholders and proposed a transaction that has their support. Sadly, we have not received any meaningful engagement with the board of Asia Dragon. Today we announce our proposed transaction alongside the re-confirmed support in principle of c. 56 per cent. of Asia Dragon shareholders to advance this transformational initiative that we believe is in the best interests of both sets of shareholders.”
[QD Comment (JC): The Ashoka WhiteOak fund offers a more shareholder friendly corporate structure and, for frustrated shareholders in its target, the chance of switching to a fund that ought to trade much closer to NAV, and for those that want it a cash exit. This deal would clearly be transformational for Ashoka WhiteOak Emerging even if a number of Asia Dragon shareholders tick the cash box. Sadly, in recent years Asia Dragon has disappointed its shareholders, with NAV returns that languish at the bottom of those of its peer group, and over the past year well behind those of the bidder.]
Details of the transaction are outlined in full below:
The Board of AWEM believes that the Proposed Transaction should deliver AWEM shareholders a vehicle of materially enlarged scale, with improved secondary market liquidity and a reduced Ongoing Charges Ratio. For Asia Dragon shareholders, the Proposed Transaction should deliver:
The Board of AWEM has received feedback from shareholders controlling c. 56 per cent. of Asia Dragon’s voting rights that they would be supportive in principle of the Proposed Transaction on the terms outlined, which are explained further below. To progress the Proposed Transaction, the Board of AWEM has made repeated efforts to explore discussions with the Board of Asia Dragon, beginning on 14 March 2024. Following a response on 18 March 2024, terms of the Proposed Transaction were outlined on 20 March 2024 and a formal proposal was sent on 28 March 2024 (the ‘Formal Proposal‘), with acknowledgement by the Board of Asia Dragon on 1 April 2024. Since this time, there has been no further correspondence from the Board of Asia Dragon despite several further attempts to engage.
The Board of AWEM has in recent days further consulted with the aforementioned Asia Dragon shareholders, who have re-confirmed their support in principle for the Proposed Transaction. The Board of AWEM welcomes further engagement by the Board of Asia Dragon on the Proposed Transaction.
Terms of the Formal Proposal
The Proposed Transaction would be effected by way of a scheme of reconstruction pursuant to section 110 of the Insolvency Act 1986 (the ‘Scheme’). In accordance with customary practice for such schemes involving investment companies, the City Code on Takeovers and Mergers is not expected to apply to the Proposed Transaction pursuant to the Scheme.
As outlined above, the Board of AWEM submitted the Formal Proposal to the Board of Asia Dragon on 28 March 2024, that included the following illustrative terms:
It is emphasised that there can be no certainty that engagement will progress, that heads of terms will be agreed (either on the basis set out in this announcement or otherwise), or whether the Proposed Transaction will take place at all. Should heads of terms for the Proposed Transaction be agreed, further details and a proposed timetable of the Scheme will be announced.
The Proposed Transaction remains subject to, inter alia, further due diligence, the recommendation of the Boards of Asia Dragon and AWEM to proceed, necessary approvals by the shareholders of Asia Dragon and AWEM, relevant tax clearances being received by Asia Dragon, and relevant Financial Conduct Authority (‘FCA‘) approvals.
AWEM : Ashoka WhiteOak Emerging Markets announces proposed transaction with the Asia Dragon Trust
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