LONDON: The Board of BlackRock Throgmorton Trust plc has agreed a proposed combination with BlackRock Smaller Companies Trust plc (BRSC).
The Combination will bring together two similar investment companies with significant portfolio overlap and create a company with net assets of approximately £780 million (the “Enlarged BRSC”), delivering greater scale, liquidity and cost efficiencies. The Enlarged BRSC will consolidate its position as the largest growth-focused trust in the AIC’s UK Smaller Companies sector.
The Combination, if approved by both sets of Shareholders, will be effected by way of a scheme of reconstruction, which will include a members’ voluntary winding up of the Company under section 110 of the Insolvency Act (the “Scheme”) and the issue of New BRSC Shares to Shareholders who are deemed to have elected to roll over their investment into the Enlarged BRSC, a statement said.
As part of its continued focus on driving long-term Shareholder value, the Board, with the support of Stanhope Consulting, has undertaken an extensive sector-wide review which included an analysis of the strategies and performance of peer group companies and an assessment of all the options available to THRG. Based on the results of this review and regular engagement with Shareholders, the Board concluded that the Combination is in Shareholders’ best interests.
In connection with the Proposals, a cash exit opportunity is being offered to Shareholders for up to 38 per cent. of THRG’s issued share capital subject to a 1 per cent. discount (the “Cash Option”). The record date for participating in the Cash Option is 6.00 p.m. on 23 February 2026. Any shareholding that is not recorded on the Register by 6.00 p.m. on 23 February 2026 will not be eligible to elect for the Cash Option.
BRSC will also offer a cash exit opportunity to BRSC Shareholders for up to 28 per cent. of BRSC’s issued share capital subject to a 1 per cent. discount.
As at the Latest Practicable Date, Saba Capital Management, L.P. (“Saba”) (including the Saba Investment Vehicles) was interested in 17.8 per cent. of the voting rights in THRG and 10.4 per cent. of the voting rights of BRSC, and Saba has provided an irrevocable commitment to vote in favour of the Proposals and participate in both the THRG and BRSC cash exit, as set out in further detail below. In addition, THRG and BRSC have received letters of intent to vote in favour of the Proposals from other shareholders representing, in aggregate, 12.0 per cent. of THRG’s issued share capital and 23.9 per cent. of BRSC’s issued share capital, in each case excluding shares held in treasury.
THRG will shortly publish a circular (the “Circular”) which contains notices of two general meetings (the “General Meetings”), at which the Board is seeking Shareholders’ approval of the proposed combination of THRG and BRSC and members’ voluntary winding-up of THRG.
The Board strongly believes that the Proposals will deliver a number of significant benefits for its Shareholders, including:
- Greater scale and improved liquidity – providing exposure to a diverse range of high-quality UK Smaller Companies with excellent growth prospects
- Cost efficiencies – through reduced management fees
- Immediate value realisation opportunity – through the Cash Option
- Conditional exit opportunity – introduction of a triennial 100 per cent. conditional tender offer, linked to performance against the Benchmark
- Management expertise – enlarged portfolio management team with Roland Arnold as lead portfolio manager, joined by Dan Whitestone, the current portfolio manager of THRG, as co-manager.
James Will, Chairman of BlackRock Throgmorton Trust, said:
“We are delighted to announce the proposed Combination, which will create a £780 million company that combines scale, efficiency, and proven investment expertise. The Enlarged BRSC will be well placed to capture the compelling UK smaller companies opportunity, underpinned by BlackRock’s deep investment heritage which spans many decades and cycles.
The proposed Combination follows a comprehensive review of available options by the Board and is focused on driving long-term value for Shareholders through greater scale, liquidity and cost efficiencies. Continuing Shareholders will benefit from a portfolio of high quality, diversified UK smaller companies, and the continuity of BlackRock’s investment philosophy and process that has proven highly successful over the long term.
Shareholders will be offered an initial cash exit, while continuing Shareholders will benefit from exposure to an enlarged company which will be well positioned to capitalise on the continuing significant value opportunity in the sector. The Board and BlackRock strongly believe in the long-term growth prospects of the UK smaller companies sector and the sector’s proven ability to outperform larger companies over time.”
Benefits of the Proposals
The Board believes that the Proposals will have the following benefits for Shareholders:
- Scale: The Enlarged BRSC is expected to have net assets of approximately £780 million (on the basis of the trusts’ respective net asset values as at 16 February 2026 and assuming full take up of both the Cash Option and the BRSC Tender Offer). This increased scale is expected to improve secondary market liquidity for continuing Shareholders, support the marketability of the Enlarged BRSC and provide the BRSC Board with additional flexibility in pursuing discount control initiatives.
- Continuity: shareholders in the Enlarged BRSC will see benefits from the effective continuity of Investment Manager and closed-ended structure. These include:
- Combined portfolio manager expertise: Building on a combined investment track record spanning several decades and investment cycles, the Enlarged BRSC will bring together two highly experienced, well-regarded UK small-cap managers, Roland Arnold and Dan Whitestone, who have collaborated for over 10 years, and will co-manage a clear and distinct investment strategy, remaining disciplined in their investment philosophy and process that have proven successful over the long term.
- Portfolio of quality growth companies: the Enlarged BRSC will create a single BlackRock-managed UK smaller companies trust, merging two diversified portfolios with approximately 75 per cent. overlap as at 31 January 2026. The Enlarged BRSC will continue to prioritise quality growth companies driven by strong management teams, leading market positions, pricing power, robust balance sheets, healthy margins, strong earnings growth and high levels of cash conversion.
- Closed-ended vehicle: the investment trust structure will continue to allow for investment in less liquid securities, where a longer-term investment horizon and the ability to invest patiently is often required, and will continue to offer the ability to smooth dividend payments over time, to use gearing and to uphold strong governance standards through an independent board of directors.
- Attractive dividend policy: the Enlarged BRSC’s dividend policy is expected to build on the track record achieved by BRSC, categorised as a ‘Dividend Hero’ by the AIC as a result of delivering annual dividend growth for more than 20 years. With effect from 1 March 2026, BRSC intends to pay dividends on a quarterly basis.
- Compelling long-term prospects: the Board and BlackRock believe UK smaller companies have the potential to outperform their larger counterparts over the long-term, consistent with the 2.8 per cent. annualised outperformance over the period December 1955 to January 2026, and believe in the Enlarged BRSC’s ability to outperform its benchmark (being the Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies) Index) over the long-term.
- THRG and BRSC have both outperformed the Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies) Index over the last 10 years to 31 January 2026, having delivered NAV total returns of approximately 129 per cent. and 97 per cent., respectively, compared to the benchmark return of approximately 86 per cent.
- The sector has faced significant challenges over the last few years, caused by greater outflows leading to significant under-valuation, which has impacted short term performance. However, UK smaller companies continue to display robust fundamentals and good long-term growth prospects. Given investment cycle trends, the portfolio managers are confident that there remain significant opportunities within the asset class for the patient investor.
- The Board and BlackRock believe that the Combination strongly positions the Enlarged BRSC to capitalise on any change in sentiment towards UK smaller companies.
- Initial cash exit opportunity: while the Board believes the benefits and strategic rationale of the Combination are compelling for continuing Shareholders, all Shareholders will be offered a cash exit opportunity in connection with the Scheme, subject to a 1 per cent. discount, for up to 38 per cent. of THRG’s issued share capital (excluding shares held in treasury).
- Triennial conditional exit opportunity: subject to completion of the Combination, the Enlarged BRSC will offer a triennial performance-related tender offer for up to 100 per cent. of its issued share capital (excluding shares held in treasury) at a 4 per cent. discount to NAV (less costs), which will be triggered if the Enlarged BRSC underperforms its benchmark, the Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies) Index, over the relevant performance period.
- Reduced management fees: subject to completion of the Combination, BlackRock has agreed to a reduction in the annual management fee payable by the Enlarged BRSC to: 50 bps on NAV up to £500 million; 47.5 bps on NAV in excess of £500 million and up to £750 million; and 45 bps on NAV in excess of £750 million. This will be the lowest management fee for investment companies in the AIC’s UK Smaller Companies sector that do not have a performance fee.
- BlackRock Cost Contribution: continuing shareholders will be materially, if not entirely, insulated from the costs of the Proposals as a result of the application of the BlackRock Cost Contribution, by way of a fee waiver equal to six months of the reduced management fee that would otherwise be payable by the Enlarged BRSC following implementation of the Scheme based on the estimated Net Asset Value of the Enlarged BRSC as at the Calculation Date.
- Lower ongoing charges: The Proposals will reduce fixed costs proportionately to NAV and, in combination with the reduced management fees, deliver a competitive OCR for the Enlarged BRSC estimated to be 0.63 per cent. (which excludes the benefit of the BlackRock Cost Contribution) compared to BRSC’s OCR of 0.8 per cent. and THRG’s average OCR over the last five years to 30 November 2025 of 0.82 per cent. with performance fees included. This will be the lowest OCR for investment companies in the AIC’s UK Smaller Companies sector that do not have a performance fee.
Summary Information on BRSC and the Enlarged BRSC
BRSC is a closed-ended investment company incorporated in Scotland on 2 May 1906. It is an investment company as defined by section 833 of the Companies Act and operates as an investment trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010. Its investment objective is to achieve long-term capital growth for shareholders through investment mainly in smaller UK quoted companies.
BlackRock Fund Managers Limited will continue as manager to the Enlarged BRSC (the “AIFM”). The AIFM delegates certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (the “Investment Manager” and, together with the AIFM, “BlackRock”). The Investment Manager manages assets for open-ended and closed-ended funds, and institutional and private clients throughout the world. Nine of these funds (including THRG and BRSC) are listed closed-ended investment companies with combined assets of approximately £4.4 billion (as at 31 January 2026).
The Enlarged BRSC will largely follow BRSC’s current investment strategy, seeking to achieve long- term capital growth through investing predominantly in UK small and mid-cap companies. The portfolio managers will be permitted to use gearing in the form of debt up to 20% of net assets to enhance returns and have the ability to invest up to 15% of the portfolio in non-UK listed smaller companies. The BlackRock Emerging Companies team has extensive experience investing both within the UK and internationally and believes that accessing opportunities not available in the UK (for example, in technology), can boost returns in the portfolio, without increasing the volatility.
The Enlarged BRSC’s portfolio will be managed by Roland Arnold, BRSC’s existing lead portfolio manager. Roland has enjoyed a 20-year career investing in UK small and mid-cap companies. Dan Whitestone, the current lead portfolio manager of the Company, will be a named co-manager of the Enlarged BRSC. Dan is an experienced fund manager, with an extensive track record and knowledge of investing in UK listed small and mid-cap companies as well as emerging companies across international developed markets. Dan will support Roland through ongoing stock and industry level research and debate and will also focus on the global small cap element of the portfolio. Roland will have the final decision over positioning in the portfolio of the Enlarged BRSC.
Under this new arrangement, Shareholders in the Enlarged BRSC will benefit from the experience and expertise of both portfolio managers as well as the wider resources of BlackRock’s highly experienced Emerging Companies team, with its excellent access to company management and research across the UK smaller companies sector. The Enlarged BRSC will also deliver greater scale, improved share liquidity and cost efficiencies and the lowest management fee in the AIC’s UK Smaller Companies sector for investment companies without a performance fee.