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Investment trust insider on mergers

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Investment trust insider on mergers – The direct lending fund that should be expanding, not shrinking or disappearing

Another investment company bites the dust as CT Property Trust (CTPT) becomes the latest to announce it is on the receiving end of a bid. This time, unlike Civitas (CSH) where I continue to think shareholders should reject the derisory offer, the bid price looks more reasonable.

At the equivalent of 79.2p based on a price for LondonMetric (LMP) of 174p, the offer gives CTPT shareholders a decent upside to the pre-offer price while allowing some benefit to flow to LMP shareholders, encouraging them to support the deal.

CTPT shareholders will still be invested in an asset trading on a discount – 174p is a 12.5% discount to LMP’s last NAV – but they will have closed some of the gap and will be invested in a larger, more liquid vehicle.

This latest transaction reinforces a message that I have been trying to get across for a while now – in a merger situation, there is no need for one or both of the funds to be trading at a premium. True, if there is a cash exit option, shareholders are obviously more likely to take it up if they are going to end up in a vehicle that is trading at a discount. However, there are advantages to mergers beyond just the immediate provision of liquidity.

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