A major merger between two FTSE-listed infrastructure giants has been called off following a significant backlash from investors. The deal, which would have created the UK's largest infrastructure investment company, was abandoned after one party failed to secure sufficient support from its own shareholders.
Deal Details and Shareholder Discontent
The proposed union was between HICL Infrastructure and The Renewables Infrastructure Group (TRIG). Announced on 17 November, the terms offered TRIG shareholders a partial cash exit of up to £250m in aggregate, equating to roughly 11 per cent of TRIG's share capital.
Had the merger proceeded with full take-up of this cash option, HICL investors would have owned 56 per cent of the new entity, with TRIG shareholders holding the remaining 44 per cent. However, analysts and investors quickly raised concerns about the balance of the proposal.
Investment bank Peel Hunt noted that while TRIG shareholders had clear incentives, including the cash exit, there were "fewer for HICL shareholders, where a liquidity opportunity is lacking despite a material shift in strategy and portfolio." This imbalance ultimately led to the deal's downfall.
Strategic Rationale Versus Investor Fury
In a statement, HICL confirmed the termination, explaining its board "determined that it cannot progress the transaction without a substantial majority of support from its own investors." Despite the collapse, both companies stated they remained convinced of the strategic logic behind combining their portfolios.
The merger was designed to blend HICL's core of government and public-private partnership (PFI) assets with TRIG's extensive renewable energy portfolio. HICL, listed in 2006, owns iconic UK infrastructure including:
- The High Speed 1 rail link.
- The Home Office's Westminster headquarters.
- The Ministry of Defence's Northwood base.
- Lewisham Hospital.
TRIG, formed in 2013, specialises in renewable projects, operating dozens of wind and solar farms across the UK and Europe, including in Germany, France, and Spain.
Implications for the UK Infrastructure Sector
The failed merger highlights the growing influence of shareholder activism in corporate deals, particularly in the listed fund sector. Investors are scrutinising transactions more closely, demanding terms that offer fair value and clear benefits to all parties.
For now, both HICL and TRIG will continue to operate as independent entities. The episode serves as a stark reminder that even deals with strong strategic foundations can unravel without the crucial backing of the investor base. The focus for both boards now will likely shift to delivering standalone value and potentially revisiting consolidation options in a different form in the future.
