- 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. (NYSE: MIY), BlackRock MuniYield Pennsylvania Quality Fund (NYSE: MPA), 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.
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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BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the “Closed-end Funds” section of www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Funds. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this release.
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With respect to the Funds, the following factors, among others, could cause actual events to differ materially from forward-looking statements or historical performance: (1) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for the Funds or a Fund’s net asset value; (2) the relative and absolute investment performance of the Funds and its investments; (3) the impact of increased competition; (4) the unfavorable resolution of any legal proceedings; (5) the extent and timing of any distributions or share repurchases; (6) the impact, extent and timing of technological changes; (7) the impact of legislative and regulatory actions and reforms, and regulatory, supervisory or enforcement actions of government agencies relating to the Funds or BlackRock, as applicable; (8) terrorist activities, international hostilities, health epidemics and/or pandemics and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (9) BlackRock’s ability to attract and retain highly talented professionals; (10) the impact of BlackRock electing to provide support to its products from time to time; and (11) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.
Annual and Semi-Annual Reports and other regulatory filings of the Funds with the Securities and Exchange Commission (“SEC”) are accessible on the SEC's website at www.sec.govand on BlackRock’s website at www.blackrock.com, and may discuss these or other factors that affect the Funds. The information contained on BlackRock’s website is not a part of this press release.
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