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 modified the terms for the proposed combination of the two
funds (the “Merger”).
Jim Baker, President, CEO and Chairman of KYN and KMF said “The
updated terms for the Merger streamline the proposed combination
and related events into a single transaction. We continue to
believe the Merger is a compelling transaction for KYN and KMF
stockholders and provides an efficient way for KMF investors
seeking liquidity to monetize their shares.”
A comparison of certain key terms for the previously announced
Merger agreement and related transactions (the “Original Terms”) to
the updated terms announced today (the “Updated Terms”) is as
follows:
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Original Terms |
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Updated Terms |
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Merger: |
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KYN will acquire substantially all the assets and liabilities of
KMF. |
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No change. See “Merger Details” below. |
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Merger Consideration: |
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The outstanding common stock of KMF will be exchanged for newly
issued common stock of KYN. The exchange ratio will be based on the
relative per share net asset values of each fund immediately prior
to the Merger’s closing date. |
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At each KMF stockholder’s election, the outstanding common stock of
KMF will be exchanged for either (i) newly issued common stock of
KYN (“Stock Consideration”) or (ii) cash (“Cash Consideration”).The
exchange ratio for Stock Consideration will be based on the
relative per share net asset values of each fund immediately prior
to the Merger’s closing date.Cash Consideration will be equal to
95% of KMF’s per share net asset value immediately prior to the
Merger’s closing date.The amount of KMF common stock exchanged for
Cash Consideration shall not exceed 15% of KMF’s outstanding shares
of common stock. Cash Consideration shall be subject to pro-ration
to the extent KMF stockholders, in the aggregate, elect to exchange
an amount of common stock in excess of this 15% cap. See “Merger
Consideration” below. |
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Stockholder Approvals: |
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The Merger is subject to KYN and KMF stockholder approval. |
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No change. |
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KMF Tender Offer: |
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Subject 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 net asset value per share. |
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KMF is no longer planning to conduct a tender offer. See Cash
Consideration in Merger Consideration above. |
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KYN Distributions: |
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KYN management intends to recommend a one cent per share increase
to KYN’s quarterly distribution rate (raising it to 22 cents per
share) once the Merger is completed. |
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No change. |
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Kayne Anderson Fee Waiver: |
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See “Kayne Anderson Fee Waiver” below. |
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No change. |
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Merger DetailsKYN and KMF have entered into an
amended merger agreement, which incorporates the updated terms
outlined above (the “Revised Merger Agreement”). The Revised Merger
Agreement 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 (the “Proxy Materials”), 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.
The Merger is expected to qualify as a tax-free reorganization
for federal income tax purposes and, as a result, is not expected
to be a taxable event for KYN or KMF. It is expected that no gain
or loss will be recognized for federal income tax purposes as a
result of the Merger for KYN stockholders or KMF stockholders
receiving Stock Consideration (other than cash received in lieu of
fractional shares). For KMF stockholders receiving Cash
Consideration, it is expected that such parties will recognize a
gain (but not a loss) for federal income tax purposes. KMF
stockholders should review the Proxy Materials and consult with
their tax advisers regarding the tax consequences of the Merger and
Merger Consideration they receive. KYN is not expected to incur any
incremental income tax liability (on a net basis) related to the
Merger.
Merger ConsiderationUpon completion of the
Merger, the outstanding common stock of KMF will be exchanged for,
at the election of each KMF stockholder, either (i) newly issued
common stock of KYN (“Stock Consideration”) or (ii) cash (“Cash
Consideration” and collectively with Stock Consideration, the
“Merger Consideration”). KMF’s stockholders will be sent an
election form to determine the form of Merger Consideration they
are electing to receive. KMF stockholders who do not submit an
election form by the applicable deadline will be considered to have
elected Stock Consideration. The amount of KMF common stock
eligible to be exchanged for Cash Consideration shall not exceed
15% of KMF’s outstanding shares of common stock. Cash Consideration
shall be subject to pro-ration to the extent KMF stockholders, in
the aggregate, elect to exchange an amount of common stock in
excess of this 15% cap.
A KMF stockholder’s election of Merger Consideration is separate
from any proxy granted by such stockholder with respect to approval
of the Merger.
The exchange ratio for Stock Consideration 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 that elect to
receive Stock Consideration would be issued approximately 0.884
shares of KYN for each share of KMF.
Cash Consideration will be equal to 95% of KMF’s per share NAV
immediately prior to the Merger’s closing date. For illustrative
purposes, if KMF’s per share NAV as of March 24, 2023 were its per
share NAV on the day prior to closing of the Merger, then KMF
stockholders that elect to receive Cash Consideration would receive
$7.99 for each share of KMF.
KMF management, its Board of Directors and Kayne Anderson have
agreed to elect to receive Stock Consideration in the Merger.
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 |
Fee1 |
$0 to $4.0 billion |
$0 to $2.4 billion2 |
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0.000% |
1.375% |
$4.0 billion to $6.0 billion |
$2.4
billion2 to $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% |
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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.
Where You Can Find Information on the MergerFor
more information about the Merger, please see Kayne Anderson’s
press release dated March 27, 2023 announcing the Merger and the
presentation titled “Kayne Anderson Closed-End Fund Update:
Overview of KYN & KMF Merger” posted on
www.kaynefunds.com/insights.
More information on the Merger will be contained in an amended
preliminary joint proxy statement/prospectus expected to be filed
with the Securities and Exchange Commission (SEC) in the coming
days. 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 benefiting 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.
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
________________________1 Represents the management fee, after
giving effect to the fee waiver, applicable to the incremental
total assets at each tier. 2 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.
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