The boards of Fidelity European Trust PLC (FEV) and Henderson European Trust PLC (HET) have signed Heads of Terms in relation to a proposed combination of the two companies.

Subject to approval by the companies’ respective shareholders, the proposal would see HET merge into FEV, with the combined companies expected to have net assets of over £2.1bn, as at 17 June 2025.

HET will be wound up and shareholders will need to decide whether to rollover into FEV or receive cash for their HET shares, with the cash option limited to 33.3 per cent.

The combined entity will continue to be managed by Fidelity in accordance with FEV’s existing investment objective and policy, with portfolio managers, Sam Morse and Marcel Stötzel, to continue managing the portfolio.

Fidelity will make a material contribution of around £2.4m towards the costs of the proposals, an amount equal to 12 months of management fees in respect of the assets to be transferred from HET.

This contribution is expected to fully offset FEV’s direct transaction costs, meaning FEV shareholders are not expected to suffer any NAV dilution from the direct costs of the combination.

The boards said that the merger would benefit the trust through enhanced liquidity, marketability, and profile.

Shareholders of the enlarged FEV will have a lower OCR and an amended lower tiered management fee arrangement.

The management fee will be reduced to 0.7 per cent (net) on the first £400m of assets; 0.65 per cent (net) on assets between £400m and £1.4bn; and 0.55 per cent (net) on assets in excess of £1.4bn.

"The Board of Fidelity European Trust PLC believes this is an exciting opportunity, with compelling benefits for both sets of shareholders, to create the ‘go to trust’ for investing in Europe,” commented Fidelity European Trust PLC chair, Davina Walter.

“The proposals will result in the company being well positioned to continue to deliver attractive returns, with new and existing shareholders benefitting from a reduced management fee and lower ongoing costs ratio.

"I would like to thank Fidelity for its commitment to the proposals and look forward to working closely with the board of Henderson European Trust plc to deliver an outcome that is in the best interests of both existing and future bhareholders.”

Henderson European Trust PLC chair, Vicky Hastings, said: “The sudden departure of the company’s two co-portfolio managers, together with our subsequent engagement with shareholders, prompted the board to undertake a comprehensive review aimed at maximising value for all shareholders over the long-term.

“The process was well informed by shareholder feedback, which made it clear that, given the material turn of events, all viable options should be considered.

“The board was particularly impressed by the number and calibre of proposals received, including from the incumbent manager, Janus Henderson. However, following a full and thorough process, the board concluded that a combination with FEV represents the best outcome for our shareholders.

“We would like to thank Janus Henderson for their professionalism throughout this review and for the longstanding support they have provided to the company and the board.”

Fidelity European Trust PLC co-portfolio manager, Marcel Stötzel, added: “This merger represents an excellent chance to create the go-to investment trust for European equities.

“Our investment style focuses on finding companies with good prospects for cash generation and dividend growth over the longer-term, at attractive valuations, with positioning driven by opportunities at the individual stock level rather than macro developments.

“Europe has some of the world’s most innovative and global leading companies – it continues to prove a fertile hunting ground for stock pickers like us.”

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