LONDON: City of London Investment Group (CLIG) has entered into a merger agreement to acquire the entire issued share capital of Karpus Management Inc. (KMI), a US-based investment management business, on a debt free basis, to be satisfied through the issue of up to 24,118,400 new shares in the capital of the Company which, based on the closing price of the Shares on the date of the Merger Agreement of 325 pence per Share, equates to £78.4 million.
In addition, each KMI Stockholder will be entitled to a cash payment pro rata to their interest in KMI of the amount by which the net working capital of KMI at Completion exceeds US$550,000 up to a maximum amount in aggregate of US$550,000.
City of London Investment Group has, over the years, looked at a wide range of businesses to identify opportunities to spread risk, create economies of scale, and provide greater security and career opportunities for employees. On each occasion when management looked in depth at a business, they decided for cultural or structural reasons, or as a result of conflicts of interest, not to proceed.
The Board has considered carefully the impact of the COVID-19 pandemic and has concluded that the strategic rationale for the merger remains sound and indeed may have been enhanced given the strong strategic fit of the two businesses, the diversification of the revenue base and risk mitigation which the Directors strongly believe will result from the merger.
Furthermore, the Board is confident that both businesses are well set to take advantage of opportunities when the situation has stabilised.
KMI is a US SEC-registered investment management business, with its principal place of business located in Pittsford, New York, that uses CEFs amongst other securities as a means to gain exposure for its client base comprising US high net worth clients and corporate accounts.
Barry Aling, Chairman of City of London Investment Group PLC, said: “CLIG shareholders will know that the objective of diversifying our revenue base beyond the capacity-constrained emerging market CEF universe has been a strategic priority for some years and this Merger will result in a quantum leap in realising that goal. While the two businesses share many similarities in terms of a CEF-driven investment philosophy and process, they are highly complementary in terms of their markets and client segments with negligible overlap. I believe that this combination will result in CLIG becoming THE global “Go-To” CEF house, offering a value-driven commitment to long-term investment performance for its clients and enhanced growth opportunities for its shareholders and employees.”
George Karpus, Chairman of Karpus Management Inc., said: “Using closed-end funds trading at discounts to their net asset values to out-perform other investment managers is something that Barry Olliff, the founder of CLIG and I discovered many years ago. As we explored a potential relationship of our two firms, we recognized that even though our client bases were different, we were not only achieving excellent investment performance, but we also shared the same view as to the treatment of employees and ownership. This merger of our two firms should make us the biggest and best in the world with respect to closed-end fund investing and should enable this success to continue in the years to come. There is a significant increase in the quality and depth of employee and technological talent along with excellent succession planning for Barry and myself that should ensure top results for our clients for many years to come.”