Edinburgh Worldwide seeks to end Saba standoff with tender offer
The board of Edinburgh Worldwide Investment Trust has offered shareholders an exit plan in its bid to bring an end to its 16-month battle with Saba Capital.
It is proposing a tender offer for up to 100 per cent of its share capital after the Board said it had “exhausted every reasonable and equitable solution with Saba”.
It also noted there was “no alternative” but to propose a tender offer, which would enable shareholders to receive a significant cash exit and also retain access to Edinburgh Worldwide Investment Trust (EWIT) shareholding of Space X.
The board said the retention of Space X is a “key differentiator” to Saba’s recent proposal which would “force shareholders to either give up Space X or become trapped in a Saba-controlled vehicle”.
Jonathan Simpson-Dent, chair of EWIT, said: “We have reached the end of the road with Saba’s obsession to break the status quo and its continuing disregard for the expressed wishes of other shareholders.
“This regrettable but necessary step is intended to protect shareholders from being trapped by Saba.”
The tender offer would see EWIT shareholders receive around 85 per cent of the invested capital in cash at close to net asset value after the trust liquidates its assets.
They would then receive a further 15 per cent based on the realised value of Space X, once crystallised, with the board anticipating such an event potentially within the next 12 months.
Space X comprises 16.6 per cent of Edinburgh Worldwide’s £782m assets under management.
Rejecting Saba’s proposal
The latest move in the showdown comes after shareholders twice rejected Saba’s attempts to take control of the company, but the New York hedge fund went on to launch a third campaign.
The US activist hedge fund, which is EWIT’s largest shareholder and has trained its sights on several struggling trusts in the past year and a half, proposed an overhaul of the trust’s board that would see shareholders appoint three independent directors.
Boaz Weinstein, Saba founder, wrote at the time: ““A board’s role is to protect investors’ capital, address underperformance and portfolio management missteps, and prioritise value creation.
“Unfortunately, the current Board has fallen short across these responsibilities.”
Shareholders were urged to support the tender offer to secure a definitive and fair exit and “bring closure to the uncertainty caused by Saba”, arguing the repeated actions had also imposed significant costs onto the company.
Simpson-Dent said: “We cannot allow the company to remain caught in a cycle of disruption driven by a minority shareholder whose objectives and commercial self-interest are fundamentally misaligned with those of the wider shareholder base.”
FCA framework frustration
Simpson-Dent also voiced his frustration at the FCA regulatory framework, which allows minority shareholders to “repeatedly attack an investment trust”.
Richard Stone, chief executive of the Association of Investment Companies, said: “Unless the FCA steps up this could happen again and again and we could see more UK-listed companies disappear.
“Saba’s attack on Edinburgh Worldwide could result in the disappearance of an investment trust which offers shareholders exposure to dynamic private companies like Space X.
Dan Coatsworth, head of markets at AJ Bell, noted that there is no guarantee the process will be straightforward for the trust.
He said: “Edinburgh Worldwide is royally fed up with meddling from activist investor Saba and has now gone for the nuclear option,offering a deal for all shareholders to cash out at close to fair value.
“This is Edinburgh’s third attempt at fighting off Saba, and there is no guarantee it will go smoothly.”