IEM and EWIT consider their futures as the battle with Saba rages
Impax Environmental Markets (IEM) has announced the results of its exit tender offer, following Friday’s (17 April) announcement that shareholders had voted overwhelmingly in favour of the offer.
Roughly 77.8% of the total share capital was tendered, leading the trust to conclude that leading shareholder Saba Capital has tendered most, if not all of it’s shares, despite the US activist declining to comment.
The tender price will be equal to the tender pools final asset value, divided by the total number of successfully tendered shares. The final price will be announced by the end of May, according to today’s RNS.
Glen Suarez, chair of IEM, said: “There are no winners here.”
Attempting to balance shareholders competing desires was “extraordinarily difficult”, Suarez said.
“The overwhelming majority of shareholders voted just a year ago in favour of IEM’s continuation, but Saba made it clear in subsequent interactions with the chair that they did not agree.”
Matthew Read, senior analyst at QuotedData, argued that this entire saga has been a “futile exercise”.
“Saba forced through its agenda by overriding the wishes of independent shareholders in what appeared to be a scramble to corral assets under management, only to throw in the towel at the final hurdle by tendering the bulk – if not all – of its own holding.”
James Carthew, head of investment companies at QuotedData, added: “Saba could have just backed the first tender, the trust would still have shrunk but by nowhere near this extent.”
Carthew argued that shareholders were faced with the choice of a cash exit or being in a Saba controlled trust, and that some of the shareholders who tendered may not have done if they knew Saba was planning an exit.
That said, QuotedData’s Read noted that ironically, the tender has given shareholders a clean exit route out of a Saba vehicle. The remaining 22% of shareholders who didn’t tender means the leftover trust will have a market cap of around £185m, much smaller than before but “not necessarily too small to survive,” according to Read.
“The question is whether the board can use this as a platform from which to rebuild the company and grow it again from here,” he said. “Given the support IEM received from non-Saba shareholders, we hope that it can.”
Carthew added that if it does, the Rump trust should implement measures to “prevent a repeat of this mess”, such as requiring any special resolution be backed by 75% of shareholders on the resolution and a further 75% of the total shareholders that vote.
This could in theory prevent “one or two large shareholders from forcing through their agenda against the wishes of the majority of investors,” he said.
EWIT: ‘The outcome is not predetermined’
The updates on Saba’s battle with the UK investment trust industry does not stop with IEM; Edinburgh Worldwide Investment trust (EWIT) has continued to push for investors to reject Saba’s proposed directors at the upcoming annual general meeting.
If shareholders reject Saba’s proposed nominees, the board has confirmed it will continue to pursue the Path for Growth strategy, which has delivered a total NAV return of 42.1% since implementation.
Independent voting advisers from ISS, Glass Lewis and PIRC have all recommended that shareholders vote in favour of re-electing the current board, which has been “welcomed” by Jonathan Simpson-Dent, chair of the trust.
While the EWIT board was “disappointed” by the recent vote on the tender offer, shareholders who support the trust should “take confidence” from the closely contested vote and make sure they vote in full at the upcoming AGM.
See also: ‘A disappointing outcome’: Edinburgh Worldwide shareholders reject tender offer
Simpson-Dent said: “We are extremely encouraged by strong and consistent support from the majority of shareholders we have engaged with, shareholders who are clear in their desire for EWIT to continue under its current mandate and who firmly oppose Saba’s control agenda.”
He concluded: “It is vital that all shareholders vote at this AGM. The outcome is not predetermined. If shareholders come out in significant numbers, there is a real opportunity to defeat Saba’s proposals.”
