Europe Fund-Merrill Lynch Merger Surprising (EF, MER)

The Europe Fund (EF) announced that its board has approved a plan to merge the fund into the open end Merrill Lynch Eurofund.

This comes after Karpus Investment Management voiced concerns about EF’s discount and left open the possibility of a proxy fight when Merrill/BlackRock tries to get a new management contract approved later this summer.

I’m a little surprised by the announcement since based on the tone of the Karpus letters, and Karpus’s actions during the Citigroup/Legg Mason transaction, I think they would have accepted EF just making a few tender offers if the discount went above a certain level.

Merrill (MER) must be thinking that the asset base of the Europe Fund would have been too small to bother managing if they were forced to make a series of tender offers, and that it would not be worth going through a proxy fight for this fund.

EF 1-yr chart: