TIDMACIC
RNS Number : 8329U
abrdn China Investment Company Ltd.
28 November 2023
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For immediate release
28 November 2023
Abrdn China Investment Company Limited (the "Company" or
"ACIC")
Proposal for the Reconstruction and Voluntary Winding-up of the
Company
The Board of ACIC (the "Board") is pleased to announce that
heads of terms have been agreed in principle for a proposed
combination of the Company with the assets of Fidelity China
Special Situations PLC ("Fidelity China") (the "Proposals"). It
believes the Proposals will benefit shareholders in the Company
("Shareholders") going forward. Fidelity China is the top
performing as well as the largest and most liquid UK investment
trust investing in China. The combination, if approved by each
company's shareholders, will be implemented through a Guernsey
scheme of reconstruction under which the Company will be placed
into voluntary liquidation and part of its cash, assets and
undertaking will be transferred to Fidelity China in exchange for
the issue of new ordinary shares in Fidelity China to
Shareholders.
Commenting on the Proposals, Helen Green, Chair of the Company,
said:
"After a very thorough review process, including consultation
with the Company's major shareholders, the Board has concluded that
the best practicable option to address the Company's
over-concentrated register and to provide significantly improved
liquidity to our shareholders is to merge with Fidelity China,
which is both sizeable and the clear leader in the China investment
company sector."
Key benefits of the Proposals:
-- Fidelity China is the top performing UK listed investment
company specialising in China over 1, 3, 5 and 10 years by NAV
total return.
-- Fidelity China, which was launched in 2010, is also the
largest UK listed investment company specialising in China with net
assets as at 31 October 2023 of GBP1.1 billion.
-- ACIC shareholders rolling over into Fidelity China are likely
to benefit from the far greater liquidity available in the market
for Fidelity China shares, should they subsequently wish to realise
their investment.
-- The Proposals include a cash exit opportunity of up to 33 per
cent of ACIC's shares in issue, at a 2 per cent discount to formula
asset value ("FAV") per ordinary share.
-- Fidelity China's manager, FIL Investment Services (UK)
Limited, has demonstrated its support for the Proposals by offering
to underwrite a portion of the costs of implementing the
Proposals.
Background to the Proposals
The Board has long been working on ways to address the
concentration of the Company's share register and the consequent
lack of liquidity and persistent discount at which its shares
trade. This concentration and lack of liquidity has been a subject
of significant and increasing dissatisfaction for a number of the
Company's major shareholders. Up until its change to a China
investment mandate in October 2021, the Company had invested on a
fund of funds basis. Whilst this had helped generate attractive
returns for investors, the fund of funds structure had clearly
moved out of favour and the Company's register became increasingly
narrow with a free float at the time of the change of mandate of
only 16 per cent. It was believed that a change to a more appealing
direct investment into China mandate, and a merger with Aberdeen
New Thai Investment Trust PLC helping to broaden the share
register, would pave the way for improved appeal to a wider range
of investors. However, the Company's share register continues to be
excessively concentrated, with just three shareholders accounting
for over 70 per cent of the Company's issued share capital and,
despite an active share buyback campaign, the discount at which the
Company's shares trade remains disappointing.
The Board has considered alternatives for improving the
situation, including potentially liquidating or merging with
another trust. The Board has consulted with the Company's major
shareholders and it has become clear that the consensus is for a
merger with Fidelity China with the option of a partial cash exit
at a small discount to FAV
The Proposals
The Board has in principle agreed heads of terms for a
combination of the Company with Fidelity China. Fidelity China's
investment objective is to achieve long-term capital growth from an
actively managed portfolio made up primarily of securities issued
by companies in China, both listed and unlisted, as well as Chinese
companies listed elsewhere. Fidelity China may also invest in
companies with significant interests in China. The combination, if
approved by each company's shareholders at the requisite general
meetings, will be implemented through a Guernsey scheme of
reconstruction pursuant to which the Company will be placed into
voluntary liquidation and part of its cash, assets and undertaking
will be transferred to Fidelity China in exchange for the issue of
new Fidelity China shares to Shareholders (the "Scheme").
New Fidelity China shares that are issued to Shareholders will
be issued on a FAV-to-FAV basis. FAVs will be calculated using the
respective net asset values of each company, adjusted for the costs
of the Proposals.
The Board believes that whilst many Shareholders may wish to
continue to be invested, it is appropriate as part of the Proposals
to offer those Shareholders wishing to realise at least part of
their investment in the Company the opportunity to do so via a cash
exit for up to 33 per cent of the Company's shares in issue, at a 2
per cent. discount to FAV per share of the Company (the "Cash
Option Discount"). Consequently, each Shareholder will have a basic
entitlement to elect to receive cash in respect of 33 per cent of
their shares in the Company. Shareholders will also be able to
elect to receive cash in respect of a larger proportion of their
shares, with elections in excess of the basic entitlement being
accepted pro rata to the extent that any Shareholders choose not to
elect for the cash exit. The benefit of the Cash Option Discount
will be credited to the interests of the Shareholders rolling over
their shareholdings in ACIC into the enlarged Fidelity China.
The combination with Fidelity China is expected to greatly
improve share trading liquidity for shareholders as well as
spreading the fixed costs of Fidelity China, as the continuing
entity, over a larger pool of assets.
City Code
In accordance with customary practice for a Guernsey scheme of
reconstruction, the City Code on Takeovers and Mergers is not
expected to apply to the combination of the Company and Fidelity
China.
Approvals
Implementation of the Proposals is subject to the approval,
inter alia, of Shareholders as well as regulatory and tax approvals
and approval by the shareholders of Fidelity China. A circular
providing further details of the Proposals and convening the
general meeting to seek the necessary Shareholder approvals will be
published by the Company as soon as practicable. It is anticipated
that the Proposals will be implemented by the end of Q1 2024.
The Company has consulted with a number of its major
shareholders who have indicated support for the Proposals. These
comprise approximately 73 per cent of the Company's share
register.
Enquiries:
Shore Capital (Financial adviser and joint corporate broker) Tel: +44 (0)20 7408 4050
Robert Finlay /Angus Murphy (Corporate Advisory)
Fiona Conroy (Corporate Broking)
Deutsche Numis (Joint corporate broker) Tel: +44 (0)20 7260 1000
Nathan Brown / George Shiel
Legal Entity Identifier: 213800R1A1NX8DP4P938
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November 28, 2023 02:00 ET (07:00 GMT)
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