LONDON, UK: The Board of Honeycomb Investment Trust and the shareholders of Pollen Street Capital Holdings Limited have reached agreement on the terms of a recommended all-share merger.

Under the terms of the combination, holders of Pollen Street shares will be entitled to receive 29.472 million new Honeycomb shares for Pollen Street’s entire issued share capital, equivalent to 45.53 per cent of the enlarged share capital of the company.

Based on the closing price of 967.5 pence per Honeycomb share on 14 February 2022 (being the last business day prior to the date of this announcement), the combination values Pollen Street’s entire share capital at approximately £285 million.

Honeycomb’s external investment manager is a member of the Pollen Street group.

Under the terms of the agreement, Honeycomb will acquire the entire issued share capital of Pollen Street in exchange for shares in Honeycomb, such that the Honeycomb and Pollen Street businesses will be combined into a premium listed commercial company owned by the shareholders of Honeycomb and Pollen Street.

Pollen Street shareholders will be entitled to receive new company shares equivalent to 45.53 per cent of the enlarged share capital of the company. The Combination will be conditional on certain shareholder approvals, including approval of a waiver of Rule 9 of the City Code on Takeovers and Mergers.

The combined Group’s investment portfolio will continue to invest predominantly in high quality, diversified and low risk asset based direct lending investments, generating stable returns.

The investment portfolio profile of the combined group is expected to remain in line with the investment profile of Honeycomb on a stand-alone basis.

It is proposed that the combined group will move from being an investment trust to become a commercial company, which the Board believes to be a more appropriate category to support the Combined Group’s growth strategy.

Accordingly, it is proposed that Honeycomb will transfer its listing category, such that the holding company of the Combined Group will be a premium listed commercial company owned by the shareholders of Honeycomb and Pollen Street, which may be a new holding company or the existing Honeycomb company.

Further details regarding the proposed structure of the Combined Group will be set out in the prospectus and circular to be published by the Company in due course.

The Combined Group will be entitled to 25 per cent of the total carried interest entitlement in the most recent flagship private equity and credit funds of Pollen Street, as well as 25 per cent of the total carried interest entitlement in all future funds established by Pollen Street.

Commenting on the Combination, Robert Sharpe, the Chairman of Honeycomb, said: “I am delighted that we have reached an agreement to combine Honeycomb and Pollen Street. The combination has a compelling strategic rationale, which will deliver strong operational and financial benefits, and generate future growth opportunities. This, alongside an attractive entry valuation, create potential for significant re-rating and valuation upside. The shares will also become more appealing and accessible for a wider range of investors. The clear strategic and financial logic of the transaction is evidenced by the significant shareholder support we have already received.”

Commenting on the Combination, Lindsey McMurray, the Managing Partner of Pollen Street, said: “Since inception in 2013, Pollen Street has built deep capability across the financial and business services sector aligned with the mega-trends that are shaping the future of the industry as well as building a high-quality institutional infrastructure and an eco-system of expertise and knowledge through its Hub. The transaction represents an exciting opportunity to build upon our strong foundations and further develop the institutional platform of Pollen Street as well as provide capital to support the development of our strategy to build a purpose-led asset management firm. The Combined Group is well placed to capitalise on the structural changes in the financial services industry and projected growth in alternative asset management to deliver value for all stakeholders.”

The Board of Honeycomb believes that the Combination offers Honeycomb shareholders the opportunity to benefit from a compelling combination with a fast growing and high performing private capital investment manager. The Pollen Street group has acted as Honeycomb’s investment manager for over six years, and has delivered consistently strong total returns for Honeycomb’s shareholders during this period.

The Combination will further align the interests of Honeycomb and the Pollen Street group, with Pollen Street’s current management team and investors becoming supportive shareholders in the combined business.