KA Fund Advisors, LLC (“Kayne Anderson”), which serves as the
investment adviser to Kayne Anderson Energy Infrastructure Fund,
Inc. (NYSE: KYN) and Kayne Anderson NextGen Energy &
Infrastructure, Inc. (NYSE: KMF), today announced that KYN and KMF
have entered into a definitive merger agreement to combine the two
funds (the “Merger”). Pursuant to this agreement, KMF will be
acquired by KYN. The Merger has been unanimously approved by each
fund’s Board of Directors and is subject to KYN and KMF stockholder
approval.
Key highlights of the Merger and related transactions
include:
- Combined entity positioned to
capitalize on favorable industry outlook and navigate current
market conditions;
- KMF common stockholders to be issued
KYN common stock in NAV-for-NAV exchange;
- Merger expected to qualify as a
tax-free reorganization and is not expected to be a taxable event
for KYN or KMF stockholders;
- KMF to conduct a tender offer for 15%
of its outstanding shares prior to closing of the Merger1;
- Kayne Anderson agrees to implement new management fee waivers
for KYN;
- In a separate announcement earlier
today, KYN announced a one cent per share increase to its quarterly
distribution rate (raising it to 21 cents per share, representing a
5% increase); and
- KYN management intends to recommend
an additional one cent per share increase to KYN’s quarterly
distribution rate (raising it to 22 cents per share, representing a
cumulative 10% increase) once the Merger is completed.
See “Merger Details”, “KMF Tender Offer”, “KYN and KMF
Distributions”, “Kayne Anderson Fee Waivers” and “Portfolio
Commentary” for additional details.
Jim Baker, President, CEO and Chairman of KYN and KMF said “We
are pleased to announce this combination. This Merger is about
positioning for the future and capitalizing on long-term tailwinds
in the energy infrastructure sector. KYN’s investment objective and
focus remain unchanged following completion of the Merger. We will
continue to thoughtfully invest in the North American energy
infrastructure sector, and stockholders of the combined entity will
have exposure to the largest macro trends in the energy industry –
energy security and the energy transition.”
Mr. Baker continued, “In the face of volatile equity markets and
an uncertain economic outlook, the funds are fortunate to undertake
this proposed combination from a position of financial strength and
are well positioned to navigate these market conditions. Our goal
is to solidify KYN as the premier entity to provide closed-end fund
investors with exposure to a portfolio of energy infrastructure
investments.”
_______________1 KMF’s tender offer is conditioned upon the
Merger being approved by KYN and KMF stockholders.
Bill Shea, Lead Independent Director of KYN and KMF commented,
“The structure of this transaction is compelling for KYN and KMF
stockholders, which is underscored by the unanimous support of each
fund’s Board of Directors. The sizable KMF tender offer, KYN’s
distribution increases, and the fee waivers Kayne Anderson is
providing to the combined entity should serve as powerful signals
of Kayne Anderson’s commitment to ensuring this is a ‘win-win’ for
KYN and KMF investors. KMF’s tender offer, which gives each
stockholder the option to participate, provides an efficient way
for KMF investors seeking liquidity to monetize their shares.”
Mr. Baker continued, “Earlier today we announced a one cent per
share increase to KYN’s quarterly distribution and we plan to
recommend an additional one cent per share increase once the Merger
closes. These actions are consistent with one of our primary
long-term goals – providing investors with an attractive
distribution. For KMF’s stockholders, this will result in an
estimated 22% increase in their quarterly distribution rate once
the Merger is completed.2 While we are disappointed with each
fund’s price to NAV discounts, we continue to believe that paying
an attractive distribution is one of the most effective ways to
address this discount and reward long-term investors.”
Mr. Baker concluded, “As the largest closed-end fund focused on
the energy infrastructure sector, KYN is a natural consolidator in
the space. We are confident the combined entity is well positioned
to pursue additional fund acquisitions on favorable terms for its
stockholders. KYN’s investors should continue to benefit from the
potential cost savings that come with increased size and scale,
enhanced trading liquidity, ‘best in class’ access to the capital
markets, and additional public and private investment opportunities
in the energy infrastructure sector.”
Merger DetailsThe Merger has
been unanimously approved by each fund’s Board of Directors, having
determined that it is in the best interests of each fund. KYN and
KMF expect the Merger to be completed during fiscal 2023, subject
to obtaining KYN and KMF stockholder approval, compliance with all
regulatory requirements and the satisfaction of customary closing
conditions. Kayne Anderson anticipates sending offering and proxy
materials to stockholders during the second quarter of fiscal 2023,
with the stockholder meetings to approve the Merger scheduled to
take place on June 20, 2023. The record date for the stockholder
meetings is March 27, 2023.
Upon completion of the Merger, the outstanding common stock of
KMF will be exchanged for newly issued common stock of KYN, with
KYN acquiring substantially all the assets and liabilities of KMF.
The exchange ratio will be based on the relative per share net
asset values (“NAV”) of each fund immediately prior to the Merger’s
closing date. As of March 24, 2023, KYN’s NAV per share was $9.51,
and KMF’s was $8.41. For illustrative purposes, if these were the
per share NAVs on the day prior to closing of the Merger, then KMF
stockholders would be issued approximately 0.884 shares of KYN for
each share of KMF.
The Merger is expected to qualify as a tax-free reorganization
for federal income tax purposes and, as a result, it is not
expected to be taxable to stockholders of KYN or KMF. KYN is not
expected to incur any incremental income tax liability (on a net
basis) related to the Merger.
KMF Tender
OfferSubject to the Merger being approved by KYN
and KMF stockholders, KMF will commence a tender offer prior to the
Merger closing for 15% of its outstanding shares of common stock at
a price equal to 95% of NAV per share. For illustrative purposes,
using KMF’s per share NAV and stock price as of March 24, 2023, the
tender offer would represent a 19% premium to KMF’s market price on
such date.
__________________2 Estimate based on (i) the relative per share
NAVs of KYN and KMF as of March 24, 2023 and (ii) a 22 cent per
share quarterly distribution rate for KYN once the Merger
closes.
KMF management, its Board of Directors, and Kayne Anderson have
agreed to not participate in the tender offer.
KYN and KMF
DistributionsEarlier today, KYN announced a one
cent increase in its quarterly distribution rate to 21 cents per
share (a 5% increase). This distribution will be paid on April 17,
2023.
KYN management also announced its intention to recommend to its
Board of Directors a one cent per share increase in KYN’s quarterly
distribution (raising it to 22 cents per share) once the Merger is
completed. The cumulative impact would be a 10% increase in KYN’s
distribution rate relative to the distribution paid to stockholders
during the first quarter of fiscal 2023. KYN management plans to
make this recommendation to its Board of Directors during the
fiscal quarter following the Merger’s closing.
Earlier today, KMF announced a quarterly distribution of 16
cents per share. This distribution will be paid on April 17,
2023.
Based on KYN’s current quarterly distribution rate (21 cents per
share) and the illustrative exchange ratio outlined in “Merger
Details,” this equates, on a pro forma basis, to a 16% increase in
the quarterly distribution rate for KMF stockholders. Based on
KYN’s expected quarterly distribution rate once the Merger closes
(22 cents per share), this would equate to a 22% increase in the
quarterly distribution rate for KMF stockholders.
Kayne Anderson
Fee WaiversSubject to the Merger
being completed, Kayne Anderson has agreed to revise its management
fee waiver agreement with KYN to significantly reduce the asset
value thresholds for such fee waivers to be applicable. The table
below outlines the current and revised management fee waivers:
KYN Asset Tiers for
Fee Waiver |
Impact of |
Management |
Management |
Current |
Revised |
Change |
Fee Waiver |
Fee3 |
$0 to $4.0 billion |
$0 to $2.4 billion4 |
|
0.000% |
1.375% |
$4.0 billion to $6.0 billion |
$2.4 billion4to $4.0 billion |
$1.6 billion lower |
0.125% |
1.250% |
$6.0 billion to $8.0 billion |
$4.0 billion to $6.0 billion |
$2.0 billion lower |
0.250% |
1.125% |
Greater than $8.0 billion |
Greater than $6.0 billion |
$2.0 billion lower |
0.375% |
1.000% |
In addition to the management fee waivers summarized above,
Kayne Anderson has also agreed to waive an amount of management
fees (based on assets at closing of the Merger) such that pro
forma, run-rate management fees payable to Kayne Anderson are the
same amount as the aggregate, run- rate management fees payable if
KYN and KMF had remained standalone funds. This waiver will last
for three years and is estimated to be approximately $0.7 million
per year based on KYN and KMF assets as of February 28, 2023.
____________________
3 Represents the management fee, after giving effect to the fee
waiver, applicable to the incremental total assets at each tier.4
Initial asset tier for fee waiver of $2.4 billion in this table is
illustrative and based on KYN and KMF assets as of February 28,
2023. The actual amount of the first asset tier will be equal to
the combined fund’s assets at the closing of the Merger.
Portfolio CommentaryKYN’s
investment objective is to provide a high after-tax total return
with an emphasis on making cash distributions to stockholders. KYN
intends to achieve this objective by investing at least 80% of its
total assets in securities of energy infrastructure companies,
which include midstream companies, renewable infrastructure
companies, and utility companies. KYN’s portfolio is primarily
comprised of investments in North American-focused energy
infrastructure companies, with equity investments in midstream
companies comprising over 80% of its current portfolio.
KMF is also focused on investing in energy infrastructure
companies, and its portfolio is similar to KYN. A larger percentage
of KMF’s holdings are utilities and renewable infrastructure
companies and, correspondingly, a smaller percentage of KMF’s
portfolio is invested in midstream companies (including natural gas
& LNG infrastructure companies). Over 50% of KMF’s holdings are
in “NextGen Companies,” which are defined as companies
participating in, or benefiting from, the global transition to
renewables and lower carbon sources of energy (also referred to as
“the energy transition”). Once the Merger closes, KYN does not plan
to have the “NextGen Company” designation on its schedule of
investments.
The energy industry is rapidly evolving and one of the biggest
macro trends influencing these changes is the energy transition. We
believe the points of distinction between traditional energy
infrastructure companies and NextGen Companies have become less
relevant for investment decision-making purposes as a larger
portion of the energy infrastructure sector has engaged in energy
transition- related investments. For example, traditional midstream
companies are participating in the energy transition through
investments in projects supporting carbon capture and
sequestration, renewable natural gas, renewable diesel, and
hydrogen. KYN’s existing portfolio has meaningful exposure to this
theme, and this exposure will grow over the next decade as the
energy infrastructure sector takes a larger role in the energy
transition. Importantly, KYN’s investment mandate (i) provides
flexibility for the combined entity to invest across a full
spectrum of companies in the energy infrastructure industry and
(ii) dynamically shift portfolio allocations among the different
industry subsectors in an effort to generate attractive
risk-adjusted returns for stockholders.
Where You Can
Find Information
on the MergerFor
more information about the Merger, please see the presentation
titled “Kayne Anderson Closed- End Fund Update: Overview of KYN
& KMF Merger” along with the “Frequently Asked Questions”
document posted on www.kaynefunds.com/insights.
More information on the Merger will be contained in the
preliminary joint proxy statement/prospectus filed with the
Securities and Exchange Commission (SEC) on the date of this press
release. KYN and KMF expect to mail a definitive joint proxy
statement/prospectus to stockholders that will contain information
about the Merger following a review period with the SEC.
This information is provided for general informational purposes
only. It does not constitute, and should not be construed as, tax,
legal, investment, or other professional advice and cannot be used
or relied upon for the purpose of avoiding tax penalties. Investors
should consult their tax adviser or legal counsel for advice and
information concerning their particular situation.
Kayne Anderson Energy Infrastructure Fund, Inc. (NYSE: KYN) is a
non-diversified, closed-end management investment company
registered under the Investment Company Act of 1940, as amended,
whose common stock is traded on the NYSE. KYN’s investment
objective is to provide a high after-tax total return with an
emphasis on making cash distributions to stockholders. KYN intends
to achieve this objective by investing at least 80% of its total
assets in securities of Energy Infrastructure Companies. See
Glossary of Key Terms in KYN’s most recent annual report for a
description of these investment categories and the meaning of
capitalized terms.
Kayne Anderson NextGen Energy & Infrastructure, Inc. (NYSE:
KMF) is a non-diversified, closed-end management investment company
registered under the Investment Company Act of 1940, as amended,
whose common stock is traded on the NYSE. KMF’s investment
objective is to provide a high level of total return with an
emphasis on making cash distributions to its stockholders. KMF
seeks to achieve its investment objective by investing at least 80%
of its total assets in securities of Energy Companies and
Infrastructure Companies. KMF anticipates that the majority of its
investments will consist of investments in “NextGen” companies,
which we define as Energy Companies and Infrastructure Companies
that are meaningfully participating in, or benefitting from, the
Energy Transition. See Glossary of Key Terms in KMF’s most recent
annual report for a description of these investment categories and
the meaning of capitalized terms.
This press release shall not constitute an offer to sell or a
solicitation to buy, nor shall there be any sale of any securities
in any jurisdiction in which such offer or sale is not permitted.
Nothing contained in this press release is intended to recommend
any investment policy or investment strategy or consider any
investor’s specific objectives or circumstances. Before investing,
please consult with your investment, tax, or legal adviser
regarding your individual circumstances.
This press release is for informational purposes only and is not
an offer to buy or the solicitation of an offer to sell any shares
of KYN or KMF. The proposed KMF tender offer would be made solely
by a formal tender offer document when available. KMF stockholders
should read that document when it is available. This press release
contains forward-looking statements related to the proposed tender
offer, including the timing and the process for the proposed tender
offer. Such statements are based on management’s current
expectations and are subject to a number of uncertainties and
risks, which could cause actual terms to differ from those
described in the forward-looking statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This
communication contains statements reflecting assumptions,
expectations, projections, intentions, or beliefs about future
events. These and other statements not relating strictly to
historical or current facts constitute forward-looking statements
as defined under the U.S. federal securities laws. Forward-looking
statements involve a variety of risks and uncertainties. These
risks include, but are not limited to, changes in economic and
political conditions; regulatory and legal changes; energy industry
risk; leverage risk; valuation risk; interest rate risk; tax risk;
and other risks discussed in detail in each fund’s filings with the
SEC, available at www.kaynefunds.com or www.sec.gov. Actual events
could differ materially from these statements or from our present
expectations or projections. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
they are made. Kayne Anderson undertakes no obligation to publicly
update or revise any forward-looking statements made herein. There
is no assurance that either fund’s investment objectives will be
attained.
Contact: Investor Relations at 877-657-3863 or
cef@kaynecapital.com
Kayne Anderson NextGen E... (NYSE:KMF)
Historical Stock Chart
From Jun 2024 to Jul 2024
Kayne Anderson NextGen E... (NYSE:KMF)
Historical Stock Chart
From Jul 2023 to Jul 2024