Fusion of Fidelity and Henderson to Form £2 Billion European Colossal Investment Fund
Fidelity European Trust and Henderson European Trust Proposing a Game-Changing Merger
It's time to shake up the UK's investment trust market as the two largest European investment trusts, Fidelity European Trust (LON: FEV) and Henderson European Trust (LON: HET), have proposed a merger! This move will create the largest dedicated European investment trust with net assets surpassing £2.1 billion.
On June 19, FEV announced this exciting opportunity, and here's what Davina Walter, chair of Fidelity European Trust, had to say, "This merger is an attractive proposition, benefiting both sets of shareholders by creating the 'go-to' trust for investing in Europe." The plans aim to lead to a reduced management fee, lower OCR (ongoing charges ratio), and a more significant, more liquid, and cost-effective European investment vehicle.
The proposals follow the resignation of HET’s co-portfolio managers, Tom O’Hara and Jamie Ross, in February, who moved to Swiss asset manager GAM Investors. Vicky Hastings, chair of Henderson European Trust, believes this move was necessary to "maximize value for all shareholders over the long-term."
How will the merged European investment trust work?
If approved by both trusts’ shareholders, Henderson European Trust will wind down, and its assets will be transferred to Fidelity European Trust. Shareholders will receive new Fidelity European shares based on an asset value-for-asset value formula. They can also choose to opt for a cash exit, limited to one-third of Henderson shares, offered at a 1.75% discount to cover transaction costs.
Claire Dwyer, head of investment companies at Fidelity International, is excited about managing the flagship investment trust for European equities, stating, "We will create a larger, more liquid, and lower-cost vehicle that benefits all shareholders."
Is now a good time to invest in European investment trusts?
European stocks could be an excellent opportunity to access undervalued companies as US stocks have dominated the investing world for much of the last decade.With innovative global leading companies and macroeconomic tailwinds, such as increased European defence spending and uncertain US tariff regimes, Europe could prove an appealing investment destination.
FEV had a discount to net asset value of 2.77%, while HET had an 8.09% discount as of close on June 18. FEV invests predominantly in continental European equities, focusing on companies that can increase their dividends over a three- to five-year period at attractive valuations, based on opportunities at the individual stock level rather than macro developments.
In summary, the proposed merger between Fidelity European Trust and Henderson European Trust offers a unique opportunity for shareholders to benefit from a larger, more liquid, and lower-cost European investment trust with enhanced scale benefits and improved market standing. Additionally, the consolidation trend in the European investment trust sector indicates a promising future for these types of products in the market.
With the proposed merger of Fidelity European Trust and Henderson European Trust, a larger, more liquid, and lower-cost European investment vehicle is in the making, potentially beneficial for shareholders. This merger comes at a time when European stocks could be an excellent investment opportunity, offering access to undervalued companies. Given the innovative global leading companies and macroeconomic tailwinds in Europe, such as increased defense spending and uncertain US tariff regimes, Europe might prove an appealing destination for investors.
