LONDON, UK: GCP Infrastructure Investments Limited (GCP Infra) has set the stage for a transformative phase as it unveils plans to join forces with GCP Asset Backed Income Fund Limited (GABI) and potentially merge with RM Infrastructure Income plc (RMII).

The Board of Directors of GCP Infra has announced that it has reached preliminary agreements for these strategic moves, outlining a roadmap for an enhanced investment landscape and optimized shareholder value.

GABI Scheme: A Strategic Union

The GABI Scheme is set to mark a pivotal step in GCP Infra’s evolution, as it aims to combine its forces with GABI through a contractual scheme of reconstruction. Under the terms of this proposal, GABI will undergo a solvent winding-up process, with its assets transitioning to GCP Infra. In return, GABI shareholders will receive new ordinary shares in GCP Infra, the exact number of which will be determined by a formula asset value (FAV) basis. This calculation method will be based on the net asset value of both GCP Infra and GABI, with transaction costs factored in. If all goes as planned, the GABI Scheme is anticipated to be finalized before the close of 2023.

RMII Scheme: Envisioning a Larger Future

While discussions are still ongoing, the GCP Infra Board is actively engaged in talks with RM Infrastructure Income plc to explore the potential for a merger. The envisioned RMII Scheme, if realized, would result in a scheme of reconstruction for RMII and a transfer of a substantial portion of its assets to GCP Infra. In exchange, GCP Infra would issue new shares to RMII. Further details about this potential merger are expected to be disclosed in due course.

Shareholder Value and Leverage Optimization

GCP Infra’s strategic moves are underpinned by a commitment to enhancing shareholder value and optimizing the Company’s financial position. The Board’s proposal includes a plan to return capital to shareholders and to reduce the Company’s leverage following the completion of the GABI Scheme. The Company’s investment policy is also slated for amendment to focus on maximizing access to sustainable and attractive investment opportunities.

In a concerted effort to address prevailing discounts to net asset value per ordinary share and to counterbalance the impacts of increased lending costs, GCP Infra has been concentrating on a multipronged approach. This includes using available cash to reduce leverage and prioritizing share buybacks over new investments. The Company’s recent biomass refinance netted approximately £50 million in proceeds, which is expected to significantly reduce its outstanding debt to around £100 million.

As part of its commitment to shareholders, GCP Infra has set out a liquidity plan. Post the GABI Scheme’s implementation, subject to approval, the Company will allocate £200 million from the enlarged portfolio for strategic purposes. This includes using £100 million to further reduce leverage and aiming for a target drawn balance of approximately £50 million, and an additional £100 million to be distributed to shareholders through share buybacks, special dividends, or other means. This liquidity commitment adds to the existing £15 million share buyback program initiated earlier this year.

While the City Code on Takeovers and Mergers is not anticipated to apply to the GABI Scheme, the Company acknowledges that other regulatory and tax requirements will need to be met. As the discussions around the RMII Scheme progress, GCP Infra reiterates that no formal offer for RMII is expected under the City Code.

GCP Infrastructure Investments’ strategic maneuvers signal a bold step toward an optimized investment landscape, bolstered shareholder value, and a renewed commitment to sustainable assets. The financial community eagerly awaits further developments in this transformative journey.

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