Saba Capital will likely gain “effective control” of IEM after tender offer
Investment trust Impax Environmental Markets have acknowledged Saba Capital is likely to have “effective control” following the completion of its exit tender offer, as the US hedge funds looks to oust the board.
In response to a letter sent to the board by Saba, Impax Envrionmental Markets (IEM) confirmed its exit tender offer remained on track, giving investors the opportunity to head for the exit.
The response said: “The board of IEM proposed the exit tender offer to provide all shareholders with an opportunity to exit the company, particularly in light of the risk that Saba could emerge as a controlling shareholder with significant influence over the Company’s strategy, objectives, and mandate.
“Saba’s announcement today reinforces the importance and timeliness of the board’s actions to protect the long-term interests of all shareholders. The board acknowledges the likelihood of Saba having effective control of the Company following the completion of the Exit Tender Offer, and as such, will constructively engage with Saba.”
The investment trust also noted that the hedge fund declined to confirm its tender election and initially looked like it was going to sell, but the “complexity and fluidity” of Saba’s structure made it difficult to “determine its post-tender shareholding”.
Saba has now stated it will roughly hold a 29.9 per cent stake in the company.
Holding a 29.9 per cent stake keeps Saba under the 30 per cent threshold, which when hit triggers a mandatory buyout offer, allowing the fund to spread its power and influence without having to purchase the company.
Saba looks to oust
In a letter sent to the board on Monday, Saba outlined its plans to requisition a general meeting of the company to “remove the entire board” and appoint a new board “composed solely of qualified, independent directors”.
Saba claimed its decision came from being “profoundly disappointed” with Impax Environmental Markets’ (IEM) performance and the board’s “inability to implement necessary strategic changes to improve the status quo”.
The hedge fund, led by New York activist financier Boaz Weinstein, said over the past five years the investment trust’s share price lagged behind its benchmark by more than 75 per cent.
Cashing out
IEM revealed on Monday that nearly four-fifths of shares were tendered for sale after investors were offered the chance to cash out amid fears Saba would try to take control.
The fund, which has a 22 per cent stake in IEM, has targeted a number of other investment trusts, including Edinburgh Worldwide Investment Trust (EWIT), pushing chairs and boards to the brink to stop Saba from taking over completely.
IEM feared Saba would try to gain control despite the majority of investors backing IEM in a vote last year, leading the trust to mount the drastic defence of shareholders cashing out of the firm’s assets.
Investors representing just under 78 per cent of shares had taken up the offer as of Monday, a figure that apparently includes the “majority, if not all” of Saba’s position.
The move will crystallise immediate profits for shareholders.
But, Saba also said in its letter, the scale of shares tendered showed there was “little demand for the company to continue in its current state”, causing them to request that the board resign and “feel a duty to advocate for change” as the largest shareholder.
Trusts buckle
Chairman Glen Saurez, said: “There are no winners here. This was an extraordinarily difficult situation to navigate, trying to balance the varied desires of all of our different shareholders.
“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.
“As a result, the board acted proactively to offer an exit to all shareholders who wished to take it.”
IEM’s announcement and Saba’s subsequent rebuttal comes as EWIT issued a rallying call to investors to fight off the hedge fund at its annual general meeting (AGM) next week.
Saba is seeking to use the trust’s AGM on 30 April to kick out the EWIT board and replace them with Weinstein’s handpicked nominees.
Similar to IEM, it is the latest powerplay from Saba to tighten its grip and take control of EWIT, but chairman Jonathan Simpson-Dent urged shareholders to “make their voice heard” to stop the fund.