abrdn Japan Equity Fund, Inc. (“JEQ”) Announces A Proposed Merger Into abrdn Global Infrastructure Income Fund (“ASGI”) And A Conditional Tender Offer

Rhea-AI Summary

abrdn Japan Equity Fund (NYSE:JEQ) has announced a significant corporate restructuring, including a proposed merger into abrdn Global Infrastructure Income Fund (NYSE:ASGI) and a conditional tender offer. The Boards of both funds have approved the merger, which requires JEQ shareholder approval.

Key details of the reorganization include:

• JEQ shareholders of record on March 14, 2025, will vote on the merger at a special meeting scheduled for June 13, 2025
• The merger is intended to be tax-free for U.S. federal income tax purposes
• ASGI's current objectives and policies will remain unchanged

Additionally, contingent upon merger approval, JEQ will conduct a cash tender offer to purchase up to 50% of outstanding shares at 98% of NAV. The Fund is suspending its managed distribution policy after March 31, 2025, to avoid disrupting the tender offer timing. The reorganization is expected to complete in Q3 2025, subject to shareholder approval.

Positive

• Tax-free reorganization for U.S. federal income tax purposes
• Tender offer provides exit opportunity for 50% of shares at 98% of NAV
• Both fund boards approve merger as beneficial for shareholders

Negative

• Suspension of JEQ's managed distribution policy after March 31, 2025
• Forced restructuring for shareholders who may prefer pure Japan equity exposure
• 2% discount to NAV in tender offer represents a loss for selling shareholders

Insights

Financial Analyst

This merger announcement represents a significant restructuring for JEQ shareholders with substantial implications. The proposed tender offer provides an attractive liquidity opportunity, allowing shareholders to redeem up to 50% of outstanding shares at 98% of NAV if the merger is approved. This is particularly valuable in the closed-end fund space where funds typically trade at discounts to their net asset values.

The conditional tender offer essentially provides a partial exit strategy near NAV, which is rare in the closed-end fund market. However, shareholders should note that if the tender is oversubscribed, their redemption requests may be prorated, potentially limiting the amount they can liquidate at this favorable price.

The suspension of JEQ's managed distribution policy after March 31, 2025 is a critical consideration for income-focused investors. This change signals a disruption to the expected income stream that may have been a primary reason some investors held the fund.

While the reorganization is intended to be tax-free, shareholders who participate in the tender offer will likely experience a taxable event for those shares. The tax implications should be carefully considered alongside the pricing advantage offered.

Investment Strategist

The merger represents a fundamental transformation in investment exposure for JEQ shareholders – shifting from a Japan-specific equity strategy to ASGI's global infrastructure income approach. These are distinctly different asset classes with varying risk profiles, geographic exposures, and income characteristics.

JEQ shareholders face a pivotal decision: either embrace this entirely new investment mandate or seek an exit. The tender offer provides a partial liquidity solution, but shareholders who maintain positions beyond the 50% tender cap will experience a complete strategy pivot regardless of their original investment thesis for purchasing a Japan-focused fund.

Global infrastructure typically offers different characteristics than Japanese equities – often providing more stable income streams with potential inflation protection, but generally different growth dynamics and cyclical responses than the Japanese market. This change may complement or conflict with investors' broader portfolio allocations and strategy.

The merger appears to follow the broader trend of fund consolidation in the closed-end space, where smaller funds are absorbed into larger vehicles to achieve economies of scale. While this may provide long-term fee efficiencies, it comes at the cost of reduced investment option specificity for those seeking targeted geographic exposure.

PHILADELPHIA, PA / ACCESS Newswire / March 11, 2025 / The Boards of Trustees/Directors of abrdn Japan Equity Fund, Inc. (NYSE:JEQ) (the "Acquired Fund") and abrdn Global Infrastructure Income Fund (NYSE:ASGI) (the "Acquiring Fund") announce today that each have approved the merger of JEQ into ASGI (the "Reorganization"). The proposed Reorganization is subject to the receipt of necessary Acquired Fund shareholder approvals.

There are no proposed changes to the current objectives or policies of ASGI as a result of the Reorganization. Individually, each Fund's Board believes that the Reorganization is in the best interest of their Fund's shareholders. The Reorganization is intended to be treated as tax-free reorganization for U.S. federal income tax purposes.

Additional information regarding the Reorganization will be presented in a prospectus/proxy statement to be sent to JEQ shareholders (the "Proxy Statement"). JEQ shareholders of record on March 14, 2025 will be asked to vote on the Reorganization at a special shareholder meeting currently targeted for June 13, 2025.

Shareholders of ASGI are not required to vote on the issuance of shares in connection with the Reorganization.

Conditional Tender Offer - JEQ

Contingent upon the approval of the proposed Reorganization by JEQ shareholders, JEQ is also announcing approval by the Board to undertake a cash tender offer. Pursuant to the offer, the Fund will purchase up to 50% of the issued and outstanding shares at a price per share to be equal to 98% of the Fund's NAV per share as determined by the Fund on the next business day following the expiration date of the tender offer. The cash tender offer will commence as soon as practical after the Shareholder meeting approving the Reorganization has occurred and prior to the reorganization with ASGI. Further details and timing will be announced following the Fund's Special Shareholder meeting.

In order to avoid potential disruption to the timing of the proposed tender offer, the Board of Directors of JEQ is suspending the Fund's managed distribution policy after payment of the previously announced quarterly distribution payable on March 31, 2025.

Subject to approval of the Reorganization by JEQ shareholders, it is currently expected that the Reorganization will be completed in the third quarter of 2025.

The Proxy Statement has yet to be filed with the U.S. Securities and Exchange Commission (the "SEC"). After the Proxy Statement is filed with the SEC, it may be amended or withdrawn. The Proxy Statement will not be distributed to shareholders of the Acquired Fund unless and until a Registration Statement comprised of the Proxy Statement is declared effective by the SEC.

Important Information

In the United States, abrdn is the marketing name for the following affiliated, registered investment advisers: abrdn Inc., abrdn Investments Limited and abrdn Asia Limited.

The information in this press release is for informational purposes only and shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities or the solicitation of any vote or approval in any jurisdiction pursuant to or in connection with the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

In connection with the proposed combination, the Acquired Fund and the Acquiring Fund plan to file with the SEC a combined prospectus/proxy statement. When the prospectus/proxy statement becomes available, shareholders are advised to read it because it will contain important information about the proposed transaction and related matters. The prospectus/proxy statement, when available, will be available for free at the SEC's website www.sec.gov.

Closed-end funds are traded on the secondary market through one of the stock exchanges. Investment return and principal value will fluctuate so that an investor's shares may be worth more or less than the original cost. Shares of closed-end funds may trade above (a premium) or below (a discount) the net asset value (NAV) of the fund's portfolio. There is no assurance that a fund will achieve its investment objective. Past performance does not guarantee future results.

https://www.abrdn.com/en-us/cefinvestorcenter/fund-centre/closed-end-funds

###

For More Information Contact:

abrdn U.S. Closed-End Funds
Investor Relations
1-800-522-5465
Investor.Relations@abrdn.com

SOURCE: abrdn Japan Equity Fund, Inc.

View the original press release on ACCESS Newswire

FAQ

What is the exchange ratio for JEQ shareholders in the merger with ASGI?

The specific exchange ratio has not been disclosed in the press release. Details will be provided in the upcoming prospectus/proxy statement.

When will JEQ shareholders vote on the proposed merger with ASGI?

JEQ shareholders of record on March 14, 2025, will vote at a special shareholder meeting scheduled for June 13, 2025.

What percentage of JEQ shares will be eligible for the tender offer?

The tender offer will purchase up to 50% of JEQ's issued and outstanding shares at 98% of NAV per share.

When will JEQ's managed distribution policy be suspended?

The managed distribution policy will be suspended after the quarterly distribution payable on March 31, 2025.

When is the merger between JEQ and ASGI expected to complete?

The merger is expected to complete in the third quarter of 2025, subject to JEQ shareholder approval.