Source: Sharecast
The combination will be implemented through a scheme of reconstruction of Shires, under which Shires shareholders will be entitled to receive new Aberdeen Equity Income Trust (AIE) shares or to elect some or all of their shares for cash.
The enlarged AEI will be the ongoing company.
The companies said in a joint statement that the merger will bring together two investment trusts with broadly similar investment objectives, good performance records and share price ratings, using the same portfolio management team.
"It will create a larger, more liquid, and more cost-effective company, which should deliver greater value for all shareholders," they said.
AEI has delivered a net asset value total return of 29.9.%, 41.2% and 63.0% over the past one, three and five years respectively. While Shires has delivered 24.8%, 42.6% and 59.2% over the same periods.
Sarika Patel, chair of AIE, said: "Bringing together two high-quality investment trusts with aligned objectives, a shared management team and complementary portfolios, the enlarged company will benefit from greater scale, improved liquidity and lower costs. The board considers that this is a rare proposal in the investment trust sector since the scheme will be undertaken from a position of strength, where both companies are performing strongly and have share prices which are either trading at, or very close to, a premium to their underlying NAVs.
"This transaction strengthens our ability to deliver a progressive dividend policy and attractive long-term returns and represents a clear vote of confidence in the enduring strengths of the investment trust structure."