LONDON, UK: The Boards of TwentyFour Income Fund Limited (TFIF) and UK Mortgages Limited (UKML) have agreed the terms of a proposed merger of the two companies, a bourse filing said.

The merger will be effected by way of a scheme of reconstruction of UKML, consisting of the winding-up of UKML, the transfer of UKML’s assets to TFIF and the issue of new ordinary shares by TFIF to UKML’s shareholders.

It is expected that the scheme will be completed by the end of the current financial quarter. UKML has granted TFIF exclusivity in relation to UKML’s portfolio until the expected date of completion of the Scheme.

The UKML Board considers the Scheme to be in the best interest of UKML and its shareholders as a whole. Both Boards have consulted with certain major shareholders of the two companies, all of whom have been supportive. Shareholders of an aggregate circa.47% of UKML’s shares have provided written support for the Scheme.

Both Boards believe that the Scheme has compelling strategic, operational and financial rationale.

The terms of the Scheme can be summarised as follows:

• TFIF will acquire the assets comprising a “Rollover Pool” of UKML, being its undertaking, cash and other assets remaining after such cash and other net current assets of UKML have been set aside in a “Liquidation Pool” of a value sufficient to meet outstanding current and future liabilities including contingent liabilities of UKML, UKML’s costs of the Scheme and a retention to meet unknown and unascertained liabilities of UKML.
• The consideration for the transfer of the Rollover Pool to TFIF will be satisfied through the issuance to UKML shareholders of new TFIF shares at a price representing a 1.25% premium to the NAV per TFIF share as at the calculation date for the Scheme.
• The proposed acquisition value per UKML Share will be 84p per UKML Share, less UKML’s costs in relation to the Scheme and the retention to meet unknown and ascertained liabilities, divided by the total number of UKML Shares in issue (excluding any shares held in treasury) as at the Calculation Date, subject to certain adjustments in accordance with the Scheme. Based on the most recent estimate of UKML’s costs in relation to the proposed Scheme and the retention, the illustrative acquisition value per UKML Share is estimated at 83.32 pence per UKML Share.
• The Scheme is an “all share” merger and there is no cash alternative. Overseas UKML Shareholders whom UKML, TFIF and the Liquidators of UKML have agreed are unable to lawfully receive TFIF shares will have the TFIF shares that they would otherwise be entitled to under the Scheme sold on their behalf by a market maker following completion of the Scheme.
• Assuming the Scheme proceeds as expected, UKML does not intend to declare any further dividends on its shares. The new TFIF shares will be entitled to receive all dividends declared by TFIF with a record date subsequent to the Scheme calculation date.
• TFIF and UKML have each agreed to bear their own costs in relation to the Scheme.

The Scheme is subject to a number of conditions, including UKML shareholder approval. It is intended that the Scheme will be completed by the current quarter end and further announcements regarding the Scheme and the necessary shareholder documentation will be made in due course.