HICL Infrastructure has agreed a combination deal with The Renewables Infrastructure Group (TRIG), creating the UK’s largest listed infrastructure investment company.

The combined group is set to boast net assets in excess of £5.3bn.

In a statement, the two companies said the combination would align the firms with the structural evolution of the infrastructure market. The firms pair said the deal will enable investment across the "full spectrum" of infrastructure, including core and renewable sectors, opening access to new growth assets and subsectors.

It is also set to provide greater capital flexibility than either HICL or TRIG individually, supported by a larger and more diversified portfolio.

As part of the deal, HICL will issue new shares to TRIG shareholders on a formula asset value-for-formula asset value basis. Shareholders will also have the option to elect for a partial cash exit of up to £250m in aggregate, representing approximately 11%.

Furthermore, Sun Life has agreed terms on which it will provide liquidity and secondary market support for the combined company by purchasing £100m of ordinary shares following the deal’s completion.

Chair at HICL, Mike Bane, said: "The combination of HICL and TRIG represents a unique opportunity to capture the key megatrends shaping the infrastructure market today, which increasingly straddle both core infrastructure and the energy transition. By combining two complementary portfolios and teams, the combined company will have the profile, expertise and access to capital to seek enhanced returns from a reinvigorated investment strategy."

Chair at TRIG, Richard Morse, added: "This is a combination that we believe offers a transformational opportunity to drive growth and deliver a resilient, forward-looking investment proposition."

However, the deal has not impressed some shareholders, as shares in HICL fell over 8% in early trading, with TRIG’s share price increasing to more than half of that of HICL’s.

CG Asset Management, which owns 18.5 million shares in HICL, said that it sees “no strategic rationale” for the transaction.

In a letter to Bane, the asset manager stated: "TRIG’s portfolio and HICL’s portfolio are invested in entirely different asset classes and their combination will not result in material cost savings. If investors wish to have exposure to both these asset classes they can easily do so by buying shares in both TRIG and HICL. However, many investors, like us, have made an explicit decision not to be invested in TRIG and have no desire to be forced to do so by the board of HICL.

"If the merger proposal was with another core infrastructure fund that holds similar assets and resulted in material cost savings, the strategic case would be far stronger. With this proposal the only clear overlap between these companies is the manager, Infrared Capital Partners, who appear to be the principal beneficiary from the transaction.

"We would urge you to focus on the interests of HICL shareholders and to abandon this proposal. In the scenario that this proposal does proceed to a vote we will recommend to our fellow shareholders that they vote against it."

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