Infrastructure Giants Set to Merge in Controversial Five Point Three Billion Pound Deal

Plans have been unveiled for a five point three billion pound merger between HICL Infrastructure and The Renewables Infrastructure Group TRIG aiming to create the largest listed infrastructure company in the United Kingdom. The boards of both investment trusts tout significant benefits from the tie up, including enhanced scale, improved liquidity, and a reinvigorated investment strategy designed to attract global institutional capital.

However, the announcement immediately prompted strong criticism from some major shareholders and analysts, who accused the boards of prioritising management interests over shareholder value. CG Asset Management which holds more than twenty million pounds in HICL shares condemned the deal as an exceptionally poor transaction for HICL shareholders and vowed to vote against it. The firm argued that HICL investors would receive little of value while absorbing exposure to less popular renewable assets owned by TRIG whose shares have struggled amid concerns about asset valuations.

Market reaction reflected this division. Shares in HICL fell by nearly seven per cent while TRIG shares rose over five per cent. The transaction structure will allow TRIG shareholders the option to cash in a portion of their holding at a ten per cent discount to net asset value underwritten by InfraRed’s parent Sun Life with a one hundred million pound commitment. TRIG will be wound up with assets exchanged for new shares in HICL according to a standard net asset value formula customary in investment trust mergers.

HICL previously focused on public private social infrastructure but has widened its scope to include transport utilities and digital assets building a three billion pound net asset value position. Meanwhile TRIG maintains a narrower emphasis on renewable assets such as wind solar and battery storage with net assets of approximately two point six billion pounds. Both trusts have lagged in shareholder returns as infrastructure funds have fallen out of favour especially in an environment of persistent high interest rates.

Shareholders are set to vote on the proposals in December amidst expectations that continued protest from institutional investors or a potential rival offer could derail the merger. The merged group would remain managed by InfraRed which will see its fees marginally reduced but will continue to exert significant control. The merger promises cost savings of merely one million pounds on an annual fee bill of nearly sixty million pounds, reinforcing perceptions that managerial interests take precedence.

Both trusts have struggled for performance over the past five years ranking near the bottom of their respective sectors. Critics suggest that HICL shareholders in particular are being asked to accept a disproportionately large share of the risks without due compensation. As it stands the merger highlights the challenges facing listed infrastructure vehicles and the importance of aligning management actions more closely with shareholder interests.