The merger between HICL Infrastructure (HICL) and The Renewables Infrastructure Group (TRIG) into a single £5.3bn behemoth proposed on 17 November will not proceed, the companies have announced this morning in a joint statement.
The U-turn follows strong criticism by shareholders and industry experts alike.
Both boards remain “convinced of the strategic rationale for the combination”, the announcement read. However, following broad engagement with shareholders, the HICL board determined that “it cannot progress the transaction without a substantial majority of support from its own investors”.
Indeed, the main opposers of the move were HICL shareholders, with significant opposition coming from 13% shareholder CG Asset Management.
The main criticism was that HICL investors invest in the trust for its core infrastructure assets and that the TRIG renewable portfolio is an entirely different asset class, with a greater degree of uncertainty regarding the NAV valuation. At the same time, consensus suggested TRIG shareholders were the most poised to benefit.
Chair of TRIG Richard Morse released a statement expressing disappointment that the combination is not proceeding and said the trust’s focus now returns to delivering an “attractive standalone strategy”.
“We are uniquely placed to capitalise on the demand growth for low-carbon, reliable power and to capture the commercial opportunities as economies across the UK and Europe electrify and decarbonise,” he said. “Doing so will allow us to deliver sustainable value and growth for our shareholders, with whom we will continue to engage on the path ahead.”
Winterflood infrastructure and renewables analyst Ashley Thomas now expects the HICL share price and discount to recover back towards their pre-deal levels of 115.7p (dividend-adjusted) and 23% to net asset value, respectively.
Similarly, the TRIG share price may fall back towards its pre-deal announcement level of 72p.
“Given many of the benefits of the proposed HICL/TRIG combination related to increased scale, we would expect both boards to continue to consider consolidation opportunities – albeit HICL investor preference may well be within the core/core plus infrastructure segment (for example with a vehicle with similar assets/characteristics such as International Public Partnerships), while TRIG may seek to consolidate the more fragmented renewable sector, where as well as scale the diversification of technology and geographic risk could reduce volatility/risk,” Thomas said.
“Given TRIG’s dividend per share was expected to be reduced by approximately 15% under the combination proposal, there may also be increased focus on this fund’s future dividend policy.”