REG - abrdn New Dawn IT - Proposed Combination with Asia Dragon Trust plc

Abrdn New Dawn Investment TrustAnnouncement

21/07/2023 07:00

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RNS Number : 7233G  abrdn New Dawn Invest Trust plc  21 July 2023

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN
OR INTO, THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND
POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF
COLUMBIA), AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH
AFRICA, IN ANY MEMBER STATE OF THE EEA OR IN ANY OTHER JURISDICTION IN WHICH
THE SAME WOULD BE UNLAWFUL

This announcement is not an offer to sell, or a solicitation of an offer to
acquire, securities in the United States or in any other jurisdiction in
which the same would be unlawful. Neither this announcement nor any part of it
shall form the basis of or be relied on in connection with or act as an
inducement to enter into any contract or commitment whatsoever.

 

21 July 2023

abrdn New Dawn Investment Trust plc

 

Legal Entity Identifier: 5493002K00AHWEME3J36

 

Proposed combination with Asia Dragon Trust plc

 

 

Introduction

 

The Board of abrdn New Dawn Investment Trust plc ("abrdn New Dawn" or the
"Company") is pleased to announce that it has agreed heads of terms with the
Board of Asia Dragon Trust plc ("Asia Dragon") in respect of a proposed
combination of abrdn New Dawn with Asia Dragon. The combination, if approved
by each company's shareholders, will be effected by way of a scheme of
reconstruction and winding up of abrdn New Dawn under section 110 of the
Insolvency Act 1986 and the associated transfer of part of the assets and
undertaking of abrdn New Dawn to Asia Dragon in exchange for the issue of new
ordinary shares in Asia Dragon ("New Asia Dragon Shares") (the "Scheme").
Under the terms of the Scheme an up to 25 per cent. cash exit opportunity will
be offered to abrdn New Dawn shareholders to realise part of their investment
in the Company.

 

The current investment manager of both companies, abrdn Fund Managers Limited
("AFML"), will, following implementation of the Scheme, continue to manage the
enlarged Asia Dragon. The Asia Dragon board will propose certain amendments to
Asia Dragon's investment policy to its shareholders (the "Investment Policy
Change") which will principally align Asia Dragon's policy with the Company's
current investment policy in order to permit investment into Australasia and
provide the management team with equivalent geographic flexibility. Asia
Dragon's existing benchmark comparative index (MSCI AC Asia (ex-Japan) Index)
will be retained. The portfolio managers of the enlarged Asia Dragon will be
Pruksa Iamthongthong and James Thom.

 

The Scheme and the Investment Policy Change are together referred to as the
"Proposals".

 

The Board of abrdn New Dawn believes that, if the Proposals are implemented,
abrdn New Dawn shareholders rolling over into Asia Dragon will benefit from,
amongst other things, the greater economies of scale that are expected to
result from the enlarged asset base, including greater secondary liquidity in
Asia Dragon shares and cost efficiencies.

 

abrdn New Dawn and Asia Dragon have received irrevocable undertakings to
support the Proposals from shareholders representing 27.0 per cent. of abrdn
New Dawn's issued share capital and 29.7 per cent. of Asia Dragon's issued
share capital (as at 20 July 2023).

 

 

Summary of the Scheme

 

The Proposals will be effected by way of a scheme of reconstruction of abrdn
New Dawn under section 110 of the Insolvency Act 1986, resulting in the
voluntary winding up of abrdn New Dawn and the transfer of part of  abrdn New
Dawn's assets to Asia Dragon on a Formula Asset Value ("FAV") for FAV basis.
In accordance with customary practice for such transactions involving
investment trusts, the City Code on Takeovers and Mergers is not expected to
apply to the Proposals. However, the Proposals will be subject to other
regulatory and tax approvals. The Proposals will also be subject to, inter
alia, approval by the shareholders of each of abrdn New Dawn and Asia
Dragon.

 

Under the Scheme, abrdn New Dawn's shareholders will be entitled to elect to
receive in respect of some or all of their abrdn New Dawn shares:

·    New Asia Dragon Shares (the "Rollover Option"); and/or

·    cash (the "Cash Option").

 

The Cash Option is limited to 25 per cent. of abrdn New Dawn's shares in issue
(excluding treasury shares). Should total elections for the Cash Option exceed
25 per cent. of abrdn New Dawn's shares in issue (excluding treasury shares),
excess elections for the Cash Option will be scaled back into New Asia Dragon
Shares on a pro rata basis.

 

The Cash Option will be offered at a discount of 2 per cent. to the abrdn New
Dawn FAV (the "Cash Discount") less the costs of realising the assets
allocated to the cash pool for the benefit of the shareholders electing for
the Cash Option. The Cash Discount will be for the benefit of the enlarged
Asia Dragon.

 

New Asia Dragon Shares will be issued as the default option under the Scheme
in the event that abrdn New Dawn shareholders do not make a valid election
under the Scheme or to the extent elections for the Cash Option are scaled
back as a result of the Cash Option being oversubscribed.

 

 

Rationale and Benefits of the Scheme

 

abrdn New Dawn and Asia Dragon both invest in the Asia Pacific (ex-Japan)
region and both are managed by AFML with a high level of commonality across
their shareholder bases. In light of these similarities, the Boards believe a
combination of the companies will create an enlarged vehicle that offers
similar investment exposure for each set of shareholders while offering
shareholders in the enlarged Asia Dragon the following benefits:

 

·    Enhanced profile: The enlarged Asia Dragon is expected to have net
assets in excess of £700 million (as at 20 July 2023), creating a leading
closed-ended vehicle for investment in the Asia Pacific (ex-Japan) region
managed by abrdn. On the basis of the current market capitalisations of abrdn
New Dawn and Asia Dragon, the enlarged Asia Dragon would be expected to
qualify for inclusion in the FTSE 250 raising the profile and enhancing the
marketability of the enlarged Asia Dragon.

 

·    Lower tiered management fee: AFML has agreed that, with effect from
the admission to listing and trading of the New Asia Dragon Shares
("Admission"), the management fee payable by Asia Dragon to AFML will be
reduced to 0.75 per cent. (currently 0.85 per cent.) on the initial £350
million of Asia Dragon's net assets and 0.5 per cent. on Asia Dragon's net
assets in excess of £350 million. In addition, the enlarged Asia Dragon will
benefit from lower costs following implementation of the Proposals as Asia
Dragon's tiered fee structure will have the effect of reducing the weighted
average fee given the increase in Asia Dragon's net assets.

 

·    Lower ongoing charges: Existing and new shareholders in Asia Dragon
are expected to benefit from a lower ongoing expense ratio with the enlarged
Asia Dragon's fixed costs spread over a larger asset base.

 

·    Enhanced liquidity: The scale of the enlarged company is expected to
improve the secondary market liquidity of Asia Dragon's shares.

 

·    Shareholder register: The Proposals will allow a number of
shareholders to consolidate their holdings across the two companies while also
creating a more diversified shareholder base through a combination of the
balance of the two share registers.

 

·    Contribution to costs: As described below, AFML has agreed to make a
cost contribution in respect of the Proposals which, in addition to the
contribution to the costs from the Cash Discount described above, is expected
to offset the direct transaction costs for Asia Dragon shareholders.

 

·    Conditional tender offer: Asia Dragon offers a five-yearly
performance related conditional tender ("Conditional Tender") with the current
performance period running from 1 September 2021 to 31 August 2026 ("2026
CTO"). It is proposed that, in the light of the Proposals and conditional on
the Scheme being implemented, the 2026 CTO will be amended such that, in the
event Asia Dragon underperforms the Benchmark over the performance period,
Asia Dragon will offer shareholders the opportunity to tender up to a maximum
of 15 per cent. of their shares; a reduction from the maximum of 25 per cent.
previously proposed. This reflects the revised Conditional Tender being of
broadly a similar size to that previously proposed for the 2026 CTO, given the
greater scale of the enlarged Asia Dragon.

 

·    Continuation Vote: Asia Dragon shareholders will have the opportunity
to vote on the continuation of Asia Dragon at every fifth AGM ("Continuation
Vote") with the next Continuation Vote to be put forward at the AGM in
December 2026.

 

 

Costs of the Proposals and AFML Contribution

 

Each company intends to bear its own costs incurred in relation to the
Proposals and the direct costs will be reflected in the FAV for each company.

 

AFML has agreed to make a contribution to the costs of the Scheme by means of
a reduction in the management fee payable by Asia Dragon to AFML. The fee
reduction will constitute a waiver of the management fee that would otherwise
be payable to AFML in respect of the assets transferred by abrdn New Dawn to
Asia Dragon pursuant to the Scheme for the first six months following the
completion of the Scheme (the "AFML Contribution"). The AFML Contribution will
be for the benefit of the shareholders of the enlarged Asia Dragon following
implementation of the Scheme.

 

 

Debt Facilities

 

It is expected that abrdn New Dawn's existing fixed rate and revolving credit
facilities, which are currently drawn at £28.55 million (as at 20 July 2023),
will be repaid and closed prior to the implementation of the Scheme.

 

 

Change of Asia Dragon Investment Policy

 

It is intended that Asia Dragon will seek shareholder approval for the
Investment Policy Change at the general meeting to be held by Asia Dragon in
connection with the Proposals. The proposed amendments to the Asia Dragon
investment policy will, inter alia, allow for investment in Australasia in
order to provide the management team greater geographic flexibility, already
reflected in abrdn New Dawn's current investment policy. Asia Dragon's
existing benchmark comparative index (MSCI AC Asia (ex-Japan) Index) will be
retained.

 

 

Board Structure

 

Following completion of the Proposals, it is expected that the Board of the
enlarged Asia Dragon will consist of eight directors and will include the five
existing Asia Dragon directors and three of the existing abrdn New Dawn
directors. After a transition period that will end on the six month
anniversary of Admission, it is intended that the Board of the enlarged Asia
Dragon will reduce to five directors consisting of three existing Asia Dragon
directors and two existing abrdn New Dawn directors.

 

 

Annual Financial Statements and Second Interim Dividend

 

In light of the Proposals, the Company's annual financial report for the year
ended 30 April 2023 will be published in August 2023. A second interim
dividend for the year then ended is expected to be declared at the end of July
2023.

 

 

Expected Timetable

 

A circular to shareholders of the Company, providing further details of the
Scheme and convening general meetings to approve the Scheme, together with a
prospectus published by Asia Dragon in respect of the issue of New Asia Dragon
Shares in connection with the Scheme are expected to be published in September
2023. The Proposals are anticipated to become effective in October 2023.

 

 

The Chairman of abrdn New Dawn, Donald Workman, commented:

 

"The combination of abrdn New Dawn Investment Trust plc with Asia Dragon Trust
plc will provide additional scale and liquidity for continuing shareholders,
whilst broadly retaining abrdn New Dawn's existing investment policy. Both
companies already benefit from a similar investment approach and management
style within the same investment group. This additional scale and Asia
Dragon's tiered fee structure, combined with the reduced fee arrangements,
will also result in a lower ongoing charges ratio for continuing shareholders.
As part of the transaction abrdn New Dawn shareholders will be offered the
opportunity to benefit from a partial realisation of their holding at a small
discount to the formula asset value. The enlarged scale should also make Asia
Dragon more attractive for potential new investors over time."

 

 

 

For further information please contact:

 

 abrdn New Dawn Investment Trust plc  Contact via AFML

 Donald Workman

 abrdn Fund Managers Limited

 Maria Allen                          +44 (0) 20 3680 0305

 Luke Mason                           +44 (0) 20 7463 5971

 Stephanie Hocking                    +44 (0) 7514 064 988

 Panmure Gordon (UK) Limited

 Alex Collins                         +44 (0) 20 7886 2500

 Sapna Shah                           +44 (0) 20 7886 2783

 Ashwin Kohli                         +44 (0) 20 7886 2786

 

Important Information

 

This announcement contains information that is inside information for the
purposes of Article 7 of the UK version of Regulation (EU) No. 596/2014 which
is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as
amended (the Market Abuse Regulation). abrdn Holdings Limited, Company
Secretary to abrdn New Dawn Investment Trust plc has arranged the release of
this announcement.

 

This announcement is not for publication or distribution, directly or
indirectly, in or into the United States of America.  This announcement is
not an offer of securities for sale into the United States.  The securities
referred to herein have not been and will not be registered under the U.S.
Securities Act of 1933, as amended, and may not be offered or sold in the
United States, except pursuant to an applicable exemption from registration.
No public offering of securities is being made in the United States.

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