Dunedin Smaller Co's proposes merger with Standard Life UK trust

London-listed investment trust Dunedin Smaller Companies has agreed, in principle, to a merger with Standard Life UK Smaller Companies Trust after undertaking a strategic review of the company and its position in the UK smaller companies sector.

Dunedin believes the merger would provide shareholders with an investment in a significantly larger investment trust, with a strong investment track record, a stronger rating, a robust discount control mechanism and substantially greater secondary market liquidity.

The Edinburgh-based firm noted that the merger would result in a "significant increase" in its valuation, as over the year ended 19 June, Dunedin shares traded at an average discount of -17.4%, while those of SLS traded at just -3.8%.

The merger would be effected by way of a reconstruction of Dunedin under section 110 of the Insolvency Act 1986, resulting in the voluntary liquidation of the firm as shareholders roll over their investment into SLS.

James Barnes, Dunedin's chairman, said, "Dunedin Smaller Companies Trust's size and the secondary market liquidity in its shares makes it challenging to attract new investors."

"The proposed merger with Standard Life UK Smaller Companies Trust will resolve these issues, creating a merged trust with assets of over £550m and substantially greater secondary market liquidity," he added.

The company expects to declare a final interim dividend before the merger.

As of 1200 BST, Dunedin shares had shot up 8.37% to 309.40p.