Andrew Pegge, a former Laxey Partners activist, has urged Abrdn Property Income (API ) to scrap plans for a highly discounted all-share merger with Custodian Property Income (CREI ) and opt for a managed wind-down that he says will deliver a better result for shareholders.

Pegge, a former business partner of Laxey’s Colin Kingsnorth, with whom he battled Alliance Trust, British Land and 3i Group, among others, from 2003 to 2012, holds one million shares in API through Pop Investments, his Isle of Man investment company. This gives him a stake of 0.26% in the real estate investment trust, which has 381 million shares in issue, according to Refinitiv data.

While that makes him a small investor in API, Pegge remains an activist and holds a seat on the board of Cuban property fund Ceiba Investments (CBA ), where he has a more commanding 10% position.

He is keen to have his voice heard, sharing with Citywire his correspondence with API’s board in the hope API will rethink its recommendation for shareholders to accept 0.78 new shares in Custodian for every API share.

Although pitched at a 26.5% premium to API’s three-month average share price, the decline in Custodian’s shares since its offer was made in January has seen its price fall from a discount of 20.8% to 28.2% below the value of API’s property at Tuesday’s close.

Pegge argued this was far from ‘fair and reasonable’, while Custodian chair David MacLellan said the deal ‘leaves an awful lot of value on the table’.

‘Do you not have any faith in the assets of the company or of the manager to achieve prices similar to valuation under an orderly liquidation or similar?’ Pegge wrote to the board earlier this month.

Pegge’s disenchantment has grown with API’s sale yesterday of two properties – an office building in London and an industrial estate in Warrington – for £16.6m, at a discount of just 0.3% to their 31 December valuation.

QuotedData analyst Richard Williams was also critical, saying the sales ‘prove that a managed wind-down would be of far greater value – even before the positive impact of any potential drop in interest rates later this year and into 2025’.

Williams calculated a wind-down would take about two years, ‘hopefully into an improving investment market’, and deliver almost 38% more for investors than the Custodian bid.

Pegge wrote to API’s board again on Monday following its rejection last week of a rival approach from Urban Logistics (SHED ), which saw the ‘last-mile’ warehouse investor improve its offer with the proposal that Abrdn retains 34% of API’s non-logistics assets for liquidation and sale at asset value.

‘For the record, as you may not have done this maths, let us imagine the entire portfolio was sold at NAV [net asset value] over the 30-month time frame you referred to last week,’ Pegge wrote. ‘I would note that if it cannot, then surely earlier valuations should be called into question.

‘In that scenario, over that time period, the IRR [internal rate of return] from Friday’s closing price of 53.4p to the fund’s last actual cum-income NAV of 83.80p is over 20%. Even applying discounts to the NAV, it is only when the discount is around 19% that the IRR declines below 10%.’

API chair James Clifton-Brown remains unconvinced. After Custodian shareholders voted 97% in favour of the merger on Tuesday, he today again urged API investors to vote in favour either by proxy by 10am on Monday or in person at a shareholder meeting on Wednesday 27 March.

He said a managed wind-down would only be undertaken if API investors voted against the merger with Custodian. He said the value obtained from selling ‘carefully selected individual assets’ could not be expected from a disposal of the whole portfolio, a process that would be riskier and more expensive and leave shareholders with reduced income.

‘Under the CREI merger, API shareholders would have continued exposure to the enlarged portfolio and its growth prospects, with enhanced dividend income that is fully covered and the potential for future share price appreciation,’ Clifton-Brown said.