Aquila European Renewables (AERI ) has pulled out of merger talks with three potential bidders after over a quarter of shareholders objected to a cut-price sale of the £304m portfolio.

Octopus Renewables Infrastructure (ORIT ) and two other investment companies had made non-binding all-share offers, Aquila said, on a net asset value for net asset value (NAV) basis. The valuations of these ranged from a small premium to a discount below the current share price, itself trailing 23% below asset value to give Aquila European a market value of £232m.

One offer had included a 10% cash exit, it said.

Alongside the investor feedback received after the fund’s annual results last month and the wide share price discount, the board concluded that a merger was ‘not value enhancing when weighed against the other potential options open to the company’.

Its other options are: an orderly wind-down and disposal of assets; the sale of some of its assets for cash; or continuing the company in its present form under the management of Aquila Capital.

It will provide an update by the end of June, three months before a shareholder continuation vote in September.

According to Refinitiv, the company’s top shareholders are funds giant BlackRock, Barclays Wealth, CCLA Investment Management and US value investor Weiss Asset Management.

Last month’s annual results reported a 10.9% drop in NAV per share to 110.6 cents to 98.5 cents caused by higher interest rates, forecast power price falls and Norway’s 35% tax on onshore wind power.

With dividends included, the total underlying loss to shareholders reduced to 6%. Earnings cover for the quarterly payments fell from 1.4 to 1.1 times but the company lifted this year’s dividend target by 5% to 5.79 cents a share and said it expected dividend cover to average 1.3 times over the next five years. At the current share price of 72 cents that puts the fund on an 8% yield. The sterling shares stand at 61.9p.

Deutsche Numis said that Aquila European’s decision to end merger talks highlighted the difficulty of completing deals when there is no ‘premium paper’ on offer to benefit the selling shareholders.

Numis analyst Colette Ord said that the board’s ‘unwillingness to accept a notable discount to NAV for the business is understandable, even more so given the essential nature of the asset base which we believe is currently valued by the shares below replacement cost and supported by a comfortable balance sheet comprising long-term low-cost debt’.

Octopus Renewables, a £587m portfolio trading at a 29% discount, confirmed it was no longer pursuing a merger with Aquila European. The company said it would continue to focus on a strategic capital recycling programme that had so far generated £97m through profitable disposals in Poland and Spain.