Phoenix Life is the largest shareholder in UKCM, holding roughly 43% of share capital.
The trust had announced on 8 November that it was in discussions with Picton regarding a possible all-share merger. However, it said today (21 November) that it would be terminating discussions on the matter.
Picton added that it is considering the feedback it had received from shareholders in both trusts and will make a further announcement «in due course».
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As required by the UK's takeover code, both trusts must state by 6 December whether they have a firm intention to make an offer, or announce they do not intend to make an offer.
In a research note, Numis analyst Andrew Rees said Phoenix Life was «always going to be the lynchpin for any potential deal», given it holds roughly 43% of UKCM's share capital.
«Operation and property companies traditionally complete mergers on a share-for-share basis, rather than NAV-for-NAV, which is typical in the investment companies sector,» he noted.
Winterflood analyst Emma Bird agreed, noting that while there were no details as to why Phoenix refused to support the proposal, she suspected it may be due to the lack of a clear catalyst for a share price uplift.
«The merger was to be effected on a NAV-for-NAV basis and the two funds were trading at similar discounts. It will therefore be interesting to see if Picton returns with new proposals over the next few weeks,» she said.
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Rees also noted the merger would have seen the combined trust internally managed, as Picton is, rather than the current external management structure of UKCM.
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