£1bn finance merger falls prey to City fears over Woodford crisis | Business News
The crisis surrounding Neil Woodford, the former ‘star’ fund manager who has blocked investors from offloading their holdings in his flagship fund, has put paid to a merger between two London-listed finance companies.
Sky News has learnt that Honeycomb Investment Trust and P2P Global Investments have abandoned talks about a £1bn tie-up in recent weeks because of institutions’ concerns about the combined company’s exposure to Mr Woodford.
Woodford Investment Management (WIM) owns about 22% of Honeycomb and is understood to have been keen to see the deal with P2PGI complete.
One source said that the transaction had been engineered by Pollen Street Capital, the manager of both investment trusts.
It was to have been structured as a takeover of Honeycomb by P2PGI, with several of the latter’s shareholders understood to have believed they were being asked to overpay for the former given the so-called Woodford ‘overhang’.
Since the crisis erupted over Mr Woodford’s company in June, the prominent fund manager has offloaded holdings worth hundreds of millions of pounds as he seeks to remove illiquid and obscure positions from his portfolio.
His firm previously owned 13% of P2PGI but sold it in May.
It was unclear on Friday whether there was any possibility of the merger discussions between Honeycomb and P2PGI being revived.
One fund management source said that Aberdeen Standard Investments and Premier Asset Management had objected to the deal, forcing it to be aborted.
Liberum is understood to have been advising Honeycomb, while Jefferies was advising P2PGI.
The two listed companies are investment trusts which have invested in credit assets at supposedly attractive returns.
Pollen Street has begun to turn around P2PGI’s performance since taking on its management.
News of the scuppered merger comes days after Sky News revealed that Mr Woodford was close to offloading another of his firm’s assets by sellling a big stake in a backer of Push Doctor, the GP-on-demand service.
WIM is nearing a deal to sell its 40% shareholding in Accelerated Digital Ventures (ADV) to fellow investor Legal & General (L&G).
As with Honeycomb, Woodford’s stake is held in its Equity Income Fund, which has been suspended to redemptions since June amid deepening concerns about the illiquidity of many of its positions and deteriorating investor confidence.
The crisis which has erupted since then has prompted searching questions about Woodford’s close links with fund platforms such as Hargreaves Lansdown and the role played by Link Asset Services, the administrator of Mr Woodford’s funds.
The firm has said it is unlikely to reopen until December but that it will continue to charge management fees in the meantime, a stance that has infuriated customers, regulators and politicians.
In recent weeks, Woodford has disposed of a number of holdings even some of his other large positions, such as its stake in the litigation funder Burford Capital, have been hit by steep falls in their value.
PJT Park Hill has been hired to arrange further disposals from the blocked fund.
P2PGI, Pollen Street and WIM all declined to comment.