Investor blasts UK infrastructure fund mega-merger branding it ‘value destructive’

The proposed merger of two of Britain’s largest investment trusts has sparked a backlash from a leading shareholder.

HICL Infrastructure and The Renewables Infrastructure Group (TRIG) yesterday agreed to join forces to create the UK’s largest listed infrastructure fund with assets worth more than £5.3billion.

The deal will bring together HICL’s portfolio spanning schools, universities, hospitals and transport projects, including the high-speed rail link between London St Pancras and the Channel Tunnel, with TRIG’s renewable energy assets such as solar power, wind farms and battery storage.

But while TRIG shares rose 5.6 per cent, HICL tumbled 6.6 per cent.

That prompted an angry response from CG Asset Management, which owns nearly 1 per cent of HICL.

In a letter to HICL chairman Mike Bane, the London-based fund manager said: ‘We are appalled by the announcement of the proposed merger of HICL with TRIG.

Tie-up: The merger will bring together HICL’s portfolio, including the high-speed rail link between London St Pancras and the Channel Tunnel with TRIG’s renewable energy assets

‘The market reaction is telling. The market’s assessment, in line with our own, makes two points very clear: this is an exceptionally poor transaction for HICL, and in aggregate this proposal is value-destructive.’

‘We can see no strategic rationale for the transaction. TRIG’s portfolio and HICL’s portfolio are invested in entirely different asset classes.’

CG Asset Management urged HICL to ‘abandon this proposal’. In a joint statement to shareholders, however, HICL and TRIG insisted the deal would create a ‘more compelling proposition’ by offering ‘greater scale, liquidity and relevance to a broader investor base’.

Bane said the tie-up ‘represents a unique opportunity to capture the key megatrends shaping the infrastructure market today, which increasingly straddle both core infrastructure and the energy transition’. 

Richard Morse, chairman of TRIG, said: ‘This is a combination that we believe offers a transformational opportunity to drive growth and deliver a resilient, forward-looking investment proposition.’

Analysts at RBC Capital Markets said the merger was a ‘positive move’.

But AJ Bell investment director Russ Mould said: ‘The big unknown is whether HICL shareholders want exposure to a renewable energy specialist, and the share price reaction would suggest not.’

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