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Shares rose in Independent Investment Trust PLC on Tuesday after it agreed heads of terms for a merger with FTSE 250-listed Monks Investment Trust PLC.
Shares in the Edinburgh-based investment trust were 14% higher at 460.38 pence on Tuesday morning in London. Monks Investment Trust shares were 1.2% lower at 1,028.76p.
Under the proposed combination, Independent Investment Trust shareholders will be offered the rollover option to receive new shares in Monks, or the cash option to realise part, if not all, of their holdings in the trust for cash.
New Monks shares that are issued to shareholders will be done on a formula asset value to formula asset value basis, calculated using the respective net asset values of each company, adjusted for transaction costs, as well any dividends declared by each party with a record data before the transaction.
Meanwhile, shareholders who pick the cash option will receive their cash at the equivalent to a 2.0% discount to Independent's FAV per share.
The directors of Independent Investment Trust, who collectively hold a 24% interest, intend to choose the rollover option.
Monks itself said that it will gain an inflow of cash into its portfolio, as well as a new collection of UK growth stocks as a result of the scheme. However, the company's portfolio will continue to be managed on its current basis, while its investment policy remains the same.
The deal is expected to be completed in November, and is subject to approval from shareholders of both companies.
Also on Tuesday, Independent Investment Trust posted a harsh underperformance for the first half of its financial year, as the deteriorating economic climate makes itself felt on equity markets, particularly the technology and leisure sectors.
For the six months ended May 31, the trust's net asset value per share total return was minus 14%. The FTSE All-Share Index made a total return of positive 6.2%, and the FTSE World Index a return of minus 3.8%.
As at the end of May, net asset value per share was 528.3 pence, down 15% from 617.9p as at November 30.
In technology, the value of Independent's holdings fell to £44.6 million on May 31 from £70.3 million on November 30.
Independent Investment Trust declared an interim dividend of 3.00 pence per share, in line with a year prior.
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