LONDON: Ashoka WhiteOak Emerging Markets Trust plc (AWEM) has proposed a strategic transaction with Asia Dragon Trust plc, which has received in-principle support from a majority of Asia Dragon shareholders. The transaction aims to provide significant benefits for both sets of shareholders, including a cash exit option for up to 50% of Asia Dragon shares.

The proposed scheme of reconstruction under section 110 of the Insolvency Act 1986 would result in the voluntary liquidation of Asia Dragon. Shareholders would have the option to roll their investment into AWEM or elect for a cash exit at a 1% discount to the Formula Asset Value (FAV). AWEM would issue new shares at a 1% premium to FAV, with the uplift from the cash option covering the transaction costs.

Since its listing on the London Stock Exchange in May 2023, AWEM has outperformed its benchmark with a NAV total return of 14.4%, driven by the WhiteOak team’s superior stock selection. The transaction is expected to enhance AWEM’s scale, liquidity, and cost efficiency, while Asia Dragon shareholders would gain access to WhiteOak’s resources and AWEM’s shareholder-friendly fee structure.

The AWEM Board has made several attempts to engage with the Asia Dragon Board since March 2024, with a formal proposal submitted on March 28, 2024. Despite limited correspondence, AWEM shareholders representing approximately 56% of Asia Dragon’s voting rights have expressed their support for the transaction.

The transaction remains subject to due diligence, board recommendations, shareholder approvals, tax clearances, and regulatory approvals. AWEM’s Board is seeking further engagement with Asia Dragon to advance the transaction.

Martin Shenfield, Chair of AWEM commented: “We have always sought as a Company to put the interests of shareholders first, for example through our market-leading, shareholder-friendly structures. We believe this is the primary obligation of a truly independent board. We have listened to clear feedback from a majority of Asia Dragon shareholders and proposed a transaction that has their support. Sadly, we have not received any meaningful engagement with the Board of Asia Dragon. Today we announce our proposed transaction alongside the re-confirmed support in principle of c. 56 per cent. of Asia Dragon shareholders to advance this transformational initiative that we believe is in the best interests of both sets of shareholders.”