- An activist hedge fund is opposing the mergers to further its own short-term agenda, causing unsustainable proxy solicitation costs should the mergers proceed
- The withdrawal occurs despite strong support from retail shareholders who have benefitted from 48 BlackRock closed-end fund mergers since 2010
- All shareholders were expected to benefit from the mergers in the form of higher income, a higher after-tax yield, lower expenses (excluding interest expense) and improved secondary market trading
The Boards of Directors/Trustees of BlackRock MuniYield Michigan Quality Fund, Inc., BlackRock MuniYield Pennsylvania Quality Fund, BlackRock Virginia Municipal Bond Trust (NYSE: BHV), BlackRock Investment Quality Municipal Trust, Inc. (NYSE: BKN) and BlackRock MuniYield Quality Fund III, Inc. (NYSE: MYI) (each, a “Fund” and collectively, the “Funds”) today announced the withdrawal of merger proposals that were previously approved by the Boards pursuant to which each of MIY, MPA, BHV and BKN would have been merged into MYI, with MYI continuing as the surviving Fund.
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While the mergers would have created economies of scale for the Funds and benefited shareholders, the Board of Directors/Trustees of each Fund determined that the proxy solicitation process and its associated costs would be substantially more burdensome and more expensive as a result of opposition from the activist shareholder. Because of the increased burden and cost, the Board of Directors/Trustees of each Fund has determined that the mergers are no longer in the best interests of each Fund’s shareholders. As a result, each Fund will continue to operate as a standalone fund pursuant to its current investment objectives and policies, and shareholders of each Fund will remain shareholders of their current Fund.
Despite the clear benefits of the proposed mergers to all shareholders, particularly retail shareholders who comprise 78% to 89% of the shareholder base of the target Funds, a self-interested minority activist shareholder recently filed proxy statements opposing the proposed mergers, which removes certain voting options for shareholders, in an effort to suppress the voice of retail investors.
The potential benefits to common shareholders of the target Funds had the mergers been completed (based on information as of July 31, 2023 for a shareholder of 1,000 shares) include:
- Higher income ranging from $8 to $260 per year
- Higher after-tax yield ranging from $58 to $352 per year
- Lower expenses (excluding interest expense) ranging from $8 to $114 per year
- Increased trading volume in a fund that would be approximately $1.7 billion in net assets with combined trading volume of $3.4 million per day
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