The £159m Dunedin Smaller Companies investment trust has agreed in principle to merge into Harry Nimmo's £400m Standard Life UK Smaller Companies trust following a strategic review.
In a stock exchange announcement this morning, the board of Dunedin said the decision had been made as it was "challenging to attract new investors".
The board also felt the two trusts were very similar following the merger between Aberdeen Asset Management and Standard Life Investments last year and said it expects the merger to result in a "significant increase" in the trust's valuation.
The combined trust will be over £550m in size and will be managed according to Nimmo's process.
The merger will be conducted on a NAV-for-NAV basis with the costs of the transaction being borne by Dunedin's shareholders.
James Barnes, chairman of the Dunedin Smaller Companies trust, said: "Dunedin Smaller Companies trust's size and the secondary market liquidity in its shares makes it challenging to attract new investors. The proposed merger with Standard Life UK Smaller Companies trust will resolve these issues, creating a merged trust with assets of over £550m and substantially greater secondary market liquidity.
"As Standard Life UK Smaller Companies trust has consistently had a substantially stronger rating than the company, the board believes the merger will result in the company's shareholders benefiting from a significant increase in the market value of their investment."
Allister Langlands, chairman of the Standard Life UK Smaller Companies trust, said: "We are delighted to announce our proposed merger with Dunedin and we believe that this reflects the excellent performance record of Harry Nimmo and his team.
"The merger with Dunedin will benefit the company's shareholders, through increased scale, a reduction in the ongoing charges ratio and increased liquidity. This is the second merger that the company has undertaken in the last ten years and demonstrates the board's intention to grow the company by a combination of performance and carefully considered corporate activity."
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