I think the price at which LIC A buys LIC B is also important....

I think the price at which LIC A buys LIC B is also important. If the shares are bought at about 5% or greater discount then the discount pretty well makes up for the MER effect. That is, the dividend on the underlying asset is sufficient to pay the MER compared with buying the underlying shares (which would only be 95% as many) and paying the MER.

I have no idea at what price various LIC's buy, or have bought in the past, other LIC's but if they are bought in the periods of high discount (eg, around 10% as was available a few months ago and presumably has been available in the past from time to time) then I see it as quite a beneficial way of getting access to a cheap parcel of underlying assets.