The board of Downing Renewables and Infrastructure (DORE ) has accepted a £175m offer for the investment company, which has seen its shares languish at a lowly valuation and also faced issues with scale. 

Bagnall Energy, which is already the top shareholder and owns just over a quarter of the green infrastructure fund, has offered 102.6p per share for the rest of the portfolio. 

It is important to note that Bagnall is the renewable energy and infrastructure arm of the Downing Estate Planning Service, meaning Downing is in some ways striking a deal with itself.  

The bid comes at a significant 23.6% premium to yesterday’s closing share price, and has seen the shares spike just under 23% to 102p this morning. 

However, when adjusted for an upcoming quarterly dividend payment, the offer comes at a 7.5% discount to the latest net asset value (NAV), with the portfolio valuation being set at 112.3p per share at the end of March. 

An eventual vote on the deal is likely to prove a formality. On top of Bagnall’s 25.4% stake, owners of an additional 16.8% of the shares have also said they will support the deal, including other significant shareholders such as wealth managers Hawksmoor and Tyndall, according to a market announcement today. 

‘A proposed acquisition at a discount to NAV, from an entity being managed by the same investment manager as DORE itself, is slightly disappointing from an analytical viewpoint – particularly given the NAV reduction in [the first quarter of 2025] that has acted to narrow the offer price’s discount to NAV,’ said Markuz Jaffe, a sector analyst at Peel Hunt. 

‘However, the reality of the situation is that this offers shareholders the opportunity to exit the smallest European-focused renewable infrastructure investment company that is not already in wind-down.’

DORE chair Hugh Little said that the trust had, in fact, delivered on its investment strategy since the December 2020 initial public offering (IPO).

‘Despite this, and the proactive steps taken by the board to narrow its share price discount in recent years, the sustained horizon of economic and macro uncertainty has weighed on the share price, which has also limited the opportunities for further raising of new capital, and which may stretch into the mid to long-term,’ he said.

Since IPO the underlying portfolio has produced an NAV total return to 36.2% to the end of March, equivalent to an annualised 7.1% return that is right in the middle of the 6.5-7.5% target, according to today’s announcement. 

However, shareholder returns have been weaker as the shares have fallen to a 29% discount as interest rates have risen and bond yields have become more attractive for income-seeking investors. 

As such, the board said it considers the ‘certainty’ of the Bagnall offer, coming at a significant premium to the prevailing share price, ‘to be fair and in the best interest of shareholders’.