LONDON, UK: The boards of Alliance Trust PLC and Witan Investment Trust plc announced that the companies have entered into heads of terms for a combination of the two companies to create Alliance Witan PLC. This follows a comprehensive strategic review by the board of Witan of its investment management arrangements.

The combination will build upon the distinctive multi-manager investment model already employed by Alliance Trust – utilising the proven management skills and deep resources of Willis Towers Watson (“WTW”) to create an actively managed global equity portfolio chosen by best-in-class stock pickers – and will apply that methodology within an even more liquid, high-profile and cost-efficient “one stop shop” investment vehicle.

With net assets of around £5 billion, significant economies of scale, eligibility for FTSE 100 inclusion, powerful and well-established brand recognition on both sides, and proven marketing expertise backed by dedicated resources and budget, Alliance Witan will aim to be the UK’s leading global equity investment proposition, at the core of retail investors’ portfolios.

The combination will be undertaken through a scheme of reconstruction by Witan under s110 of the Insolvency Act 1986, which will see Witan’s assets roll into Alliance Trust in exchange for the issue of new Alliance Witan shares to the continuing Witan shareholders.

Alliance Trust’s manager, WTW, will have overall responsibility for managing the assets of the combined Alliance Witan, employing the same proven approach as has been successfully utilised by Alliance Trust since WTW’s appointment in 2017 – selecting a diverse team of expert stock pickers, each of whom invests in a customised selection of 10-20 of their ‘best ideas’.

Shareholders in Witan will have the option of receiving cash in respect of some or all of their shares in Witan at a price equal to 97.5% of the net asset value per Witan share, less related asset realisation costs.

The Cash Option will be limited to, in aggregate, 17.5% of the Witan shares in issue (excluding treasury shares) (the “Overall Limit”). Each Witan shareholder may elect for the Cash Option in respect of more than 17.5% of their respective holding of Witan shares. However, if aggregate elections for the Cash Option exceed the Overall Limit, elections by Witan shareholders who have elected for the Cash Option in excess of 17.5% of their respective shareholding will be scaled back on a pro rata basis among Witan shareholders who have made excess applications. Such shareholders will be deemed to have elected for the Rollover Option in respect of the portion of their application which is scaled back.

Conditional upon completion of the Transaction, Alliance Witan will increase its third and fourth interim dividends for the financial year ending 31 December 2024 so that they are commensurate with the first interim dividend of 1.51p per share paid to Witan shareholders earlier this month. In addition to this first interim dividend, Witan shareholders will, in lieu of a normal second interim dividend, receive an interim pre-liquidation dividend, expected to be not less than 1.75 pence per share.

This is expected to be paid ahead of the scheme effective date and those opting to roll over will then be entitled to all Alliance Witan dividends declared post the scheme effective date. With the scheme anticipated to become effective in late September/early October, it is therefore envisaged that Alliance Witan’s third interim dividend for the year ending 31 December 2024, to be paid in December 2024 to shareholders on the register in November 2024, will be the first dividend to which former Witan shareholders will be entitled.

It is anticipated that documentation in connection with the proposals will be posted to shareholders by the end of August 2024, with a view to convening general meetings in September 2024 and the Transaction being completed by late September/early October. Completion of the Transaction will be conditional upon, inter alia, approval from the shareholders of both companies, Financial Conduct Authority approval in relation to the publication by Alliance Trust of a prospectus, the novation of the relevant Note Purchase Agreements from Witan to Alliance Witan.

Dean Buckley, Chair of Alliance Trust, commented: “The formation of Alliance Witan brings together the two leading open-architecture multi-manager investment company propositions in the UK to form a FTSE 100 equity investment vehicle with the quality, cost efficiency and profile to play a leading role in the UK investment market.  Shareholders will benefit from access to the proven investment process implemented by our investment manager, Willis Towers Watson, and access to the world’s leading stock pickers. This is also a significant moment for our industry in broader terms – Alliance Witan represents a key milestone in the history of the investment trust structure which has demonstrated its capabilities very effectively over many decades.

Witan was an early adopter of the multi-manager solution and, on behalf of my Board, we congratulate Andrew Bell and his team on all that they have achieved during their tenures.  Combining our two historic companies, established in 1888 and 1909 respectively, recognises the attractive opportunity to deploy the investment strategy, which has proved to be robust through the investment cycle, at significantly greater scale.”

Andrew Ross, Chairman of Witan, commented: “Since Andrew Bell announced his intention to retire, we have been through an extensive process to identify the best candidate to take on the management of our shareholders’ assets. The Board assessed a number of very strong proposals, including single-manager candidates with impressive track records. However, the Board was unanimous in recommending the combination with Alliance Trust, which allows the continuation of our multi manager approach at lower fees and in a larger, more liquid vehicle. The companies share similar cultures and a mutual desire to provide a “one stop shop” for retail investors in global equities. I am delighted to announce this transaction, the largest ever investment trust combination, in Witan’s 100th year as a quoted company on the London Stock Exchange. The deal will result in one of the leading investment companies listed in London and will stand our shareholders in good stead for many years to come.”