Planned merger of F&C and Ignis trusts to create mammoth property fund

Ignis has put forward a proposal for the F&C Commercial Property trust to merge with its own UK Commercial Property trust.

Former Ignis parent group Phoenix holds 16% of the £640 million F&C Commercial Property trust, while Friends Provident subsidiaries own 34%.

Both asset management giants support the move and have put forward detailed proposals to the boards of the two trusts.

They believe that a merger would dramatically reduce the combined trusts' expense ratios and increase its free float, making it more attractive to institutional and larger investors. The union would also create one of the largest UK listed property companies.

Over three years, the F&C Commercial Property trust returned -11.66% in share price terms, compared to a 36.18% fall in the MSCI ACWI/Real estate index, which dropped 36.18%. The £979 million UK Commercial Property trust is down -1.25% over the same period.

The scheme put forward by Ignis would involve the sale of all the F&C Commerical Property trust's property holding subsidiaries, together with associated debt, in exchange for the issue to FCPT's shareholders of shares in UKCPT on a net asset value (NAV) for NAV basis.

Stephen Peters, head of investment trusts at Charles Stanley, describes the move as unexpected. He added: 'If it goes ahead it will be a union of equals. It would offer a very liquid way of investing in UK commercial property and create the sixth biggest company with about £1.7 billion of assets- not quite FTSE 100, but a good size.'

'It will be interesting to see who manages it.'