GCP Infrastructure terminates merger discussions with GABI

GCP Infrastructure Investments has ceased discussions about a proposed merger with GCP Asset Backed Income Fund (GABI), it announced on Monday, with the initial heads of terms (HoTs) between the two entities terminated.

The FTSE 250 company said that, following the announcement of the intended merger, GCP Infra sought the involvement and feedback of its shareholders.

It said the majority acknowledged the company's initiatives to expedite objectives such as reducing its outstanding debt, offering capital returns to shareholders, and recalibrating the returns and risks linked to its investment portfolio.

However, some disagreements emerged regarding the proposed merger's merits among GABI's shareholders.

GCP Infra's board explained that if the merger had proceeded, they would have wanted to avoid forming a larger entity with many investors against it.

Opposition from a significant minority, the board said, could compromise the merger's success.

Despite halting the merger, GCP Infra said it remained committed to executing a strategy to reallocate its capital rapidly.

The firm's primary objectives involved using available cash reserves to decrease its current £104m debt and repurchase shares, especially when the share price was significantly lower than its net asset value.

In collaboration with its investment advisor, Gravis Capital Management, GCP Infra's board said it would persist in speeding up capital returns to the company through refinancing, selling assets, and other available means.

It also clarified that any costs associated with the now-terminated scheme would not burden the company and its shareholders, as Gravis had agreed to cover the expenses up to a predetermined limit incurred during the scheme's development.

“The board would like to thank the company's shareholders for their engagement with the scheme and for providing their feedback,” said chairman Andrew Didham.

“The board negotiated the scheme on the basis it would, if completed, accelerate the company's ability to re-allocate capital.

“The board recognises, however, that the scheme's success in achieving these objectives is likely to be reduced in a scenario where the scheme completes but a large minority of GABI shareholders were not supportive of such completion.”

In light of the feedback received, Didham said the firm had agreed with GABI to terminate ongoing discussions relating to the scheme.

“The company looks forward to progressing with its capital re-allocation strategy supported by accelerated and pro-active recycling of the portfolio where possible.”

At 0857 BST, shares in GCP Infrastructure Investments were down 0.06% at 71.95p.

Reporting by Josh White for Sharecast.com.