Minority shareholders in F&C Commercial Property trust (FCPT) have rejected a proposed takeover by Ignis-managed UK Commercial Property trust (UKCPT) to create a £1.6bn vehicle.
The proportion of votes cast against the proposal were 50.07% compared to 49.93% for the plan.
Although the merger had been approved by the FCPT board and two of its major shareholders, Friends Provident and Ignis' parent Phoenix Group, minority stakeholders had to approve the deal for it to go ahead.
Arguments in favour of the merger included lower costs and a more liquid portfolio.
However, F&C has vehemently opposed the merger, citing FCPT's good performance. It was backed by at least three brokers including Numis Securities' Charles Cade who warned arguments in favour of the merger were "not compelling."
As part of defence of the bid, F&C proposed a fee cap of 0.6% of total assets while Ignis were offering to lower the TER to 0.7%.
The vote ends a run of bad news for F&C's investment trust business. In February, Edinburgh Partners took over the renamed European Investment trust, while First State has taken control of the Pacific Assets trust. F&C also closed its UK Select trust.
F&C says: "The board of FCPT has stated that with its advisers it will now consider the future of the company and will consult with its key shareholders.
"Further to this announcement we will continue to engage with the board of FCPT on the future management arrangements for the company's portfolio."
Gary Hutcheson, Ignis investment director of property says:
"The majority of the shareholder vote for both trusts was in support of the merger. We are naturally disappointed that a very close vote on a technical issue will prevent the proposals from proceeding.
"We continue to believe that a merger would have clear benefits for all shareholders.
"Ignis has an excellent track record of active management in the UK property sector and this has been recognised by the boards and the majority of the shareholders of both trusts.
"We expect that the board of FCPT will now bring forward proposals over the future form of the company and the management arrangements given that they have already given notice to the current manager."
