Menhaden Resource Efficiency PLC - Proposed managed realisation and return of capital

20 December 2024

 

Menhaden Resource Efficiency plc (`MHN' or the `Company')

 

Proposed managed realisation and return of capital

 

 

Following the announcement on 16 September 2024 that the Company is reviewing its future options, the Board has decided that it is in the best interests of shareholders as a whole to propose an orderly realisation of the Company and return the realised capital to shareholders.  This decision has been taken in consultation with Menhaden Capital Management (the portfolio manager) and the AIFM (Frostrow Capital) and reflects feedback from a range of shareholders. The Company intends to publish a circular in early 2025 in order to put the necessary resolutions to shareholders.

 

Rationale

 

While the Board believes that the Company's resource efficiency investment thesis remains compelling, headwinds continue to weigh more widely on appetite for investment trust shares, particularly those with smaller scale and lower liquidity, resulting in wide discounts and the inability to issue new shares and grow trusts.

 

This has also been the case for Menhaden Resource Efficiency plc. Although the NAV has grown by 7.1% per annum since inception, and by 9.7% per annum over the period since the appointment of Luciano Suana as Chief Investment Officer in March 2016, the share price growth has continually lagged NAV growth (reaching a discount of 38.9% on the day prior to the 16 September announcement), resulting in the Company not achieving sufficient scale (market cap £94.2mn as at 30th November) and the shares suffering poor liquidity.

 

The Board has, with its advisers Deutsche Numis, obtained and considered shareholder feedback and undertaken a comprehensive analysis of a wide range of possible future options. The Company received multiple proposals from third parties which included alternative investment management arrangements, potential mergers with other investment trusts, and discounted cash offers for the unquoted portfolio.

 

However, the shareholder feedback received by the Board heavily supported a realisation of the portfolio and return of capital to shareholders. As such, and after taking account of the deliverability and immediacy of the options, the Board has decided to propose to shareholders that MHN is put into an orderly realisation process.

 

A circular, expected to be published early in 2025, will include detail on the proposal, including measures intended to effect the realisation on a cost- and tax-efficient basis. Shareholders do not need to take any action at this time.

 

Howard Pearce, Chair of Menhaden Resource Efficiency plc said:

"With its portfolio of investments in both listed companies and unquoted co-investments, Menhaden Resource Efficiency has delivered good NAV returns. The Board recognises and appreciates the efforts of the Menhaden Capital Management team in delivering this performance." 

 

"However, the conditions for UK investment companies have changed significantly over the past decade. Having considered a range of future options, proposals and shareholder feedback, the Board now believes it is in all shareholders' best interests to propose an orderly realisation and return of capital. Given the nature of the portfolio, the Board believes this can be achieved in a relatively short timeframe once the necessary shareholder approvals have been obtained."

 

Ben Goldsmith, CEO of the portfolio manager, Menhaden Capital Management, added:

"We are proud of the portfolio's NAV performance since launch. When I conceived Menhaden Resource Efficiency together with our chairman Graham Thomas, our thesis was that companies with the most efficient energy and resource use would outpace competitors, particularly as supply-demand dynamics continued to constrain net supply.

 

"Since then, drivers including the global race to net zero, pandemic constraints, plus the Ukraine and other wars, have highlighted the importance of energy security and critical resources for many companies. Businesses who have navigated such constraints and are adapting to the energy transition have typically outperformed. Our investment thesis remains intact, and the opportunities to allocate capital to resource-efficient businesses remain.

 

"However, considering the wider ongoing challenges for investment companies, we think the time is now right to deliver back to shareholders the return on capital they have accrued, as well as their original capital.  As investment in global resource efficiency has become more mainstream, attention now needs to turn to rebuilding natural ecosystems."

 

ENDS

 

Contacts:

 

 

About Menhaden Resource Efficiency plc

 

Menhaden Resource Efficiency plc (ticker: MHN) is an investment trust, listed on the main market of the London Stock Exchange, which invests in businesses and opportunities demonstrably delivering or benefitting significantly from the efficient use of energy and resources; irrespective of their size, location or stage of development.  Its portfolio consists primarily of direct listed and unlisted holdings across different asset classes and geographies.

 

It has net assets of £134.4mn as at 30 November 2024[1]. MHN's portfolio manager is Menhaden Capital Management (MCM).

 

MHN's historic performance is as follows - as at the date of the most recent factsheet.

 

Performance as at 30 November 2024 (%)

 

 

Past performance is not a guide to future performance. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may receive back less than the original amount invested.

 

Source: Morningstar/Frostrow. ^ RPI+3%, and the data is quoted on a month lag.

 

 

About the portfolio manager, Menhaden Capital Management (MCM)

 

MCM was co-founded in 2015 by Ben Goldsmith, MCM's chief executive officer, and Graham Thomas, non-executive chairman of MCM's investment committee. Together with Luciano Suana, Chief Investment Officer, who joined MCM in 2016 to enhance MCM's structure, processes and performance, they form MCM's investment committee. MCM will consider alternative structures in the future to continue to invest in the resource efficiency theme, and build on the strong track record they have established.