Baillie Gifford trusts seek merger in Saba latest
Two trusts tussling with the activist look to hunker down together.
2nd December 2025 11:01
by Dave Baxter from interactive investor
Baillie Gifford trusts Edinburgh Worldwide Ord (LSE:EWI) and Baillie Gifford US Growth Ord (LSE:USA) have proposed to merge, in their latest attempt to fend off activist investor Saba Capital.
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The board of Edinburgh Worldwide, the global small-cap fund, said the tie-up would offer “continued exposure to markets with the most compelling growth opportunities, delivering a combination of complementary portfolios invested predominantly in exciting public and private companies in the US, consistent with EWI’s existing approach”, as well as enhanced scale and liquidity.
Shareholders in both companies could opt for a cash exit of up to 40% of issued share capital at “a narrow discount to net asset value (NAV)”. EWI traded on a 4.2% discount on 1 December, with USA on 6.7%.
Baillie Gifford would make a significant contribution to the costs of the merger via a management fee waiver, while the new entity would have a “robust, blended board” with six directors.
However, Saba has reportedly rejected the idea for now, and the merger will not be able to pass a shareholder vote without its support.
The move is explicitly a response to the US activist, which included both trusts among its original seven targets a little under a year ago.
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Both trusts did comfortably defeat Saba at the time, but the activist recently said it intended to requisition a meeting to oust the EWI board.
It also voted against the reinstatement of USA’s board earlier this year, with the latter narrowly surviving the vote. Recent Winterflood figures indicate that Saba has around 30% of voting rights on Edinburgh Worldwide, with slightly less on Baillie Gifford US Growth.
Saba has not divulged further details about its intentions in seeking to oust the EWI board, but the trust says its financial adviser met with the activist on 1 December to seek support for the proposed merger.
“Saba immediately rejected the proposed merger,” the board said. “Instead, Saba reiterated its ongoing desire for a change of board and a review of the company’s future.
“Saba’s response indicates to the board that Saba’s ultimate objective is to gain control of the company without offering a control premium, thereby trapping the remaining 70% of shareholders in a company run for the exclusive benefit of its largest investor.”
It’s not entirely clear whether this is the case. Winterflood’s Emma Bird noted that its resistance may well be valid.
“We would like to hear Saba’s proposed new directors as well as their reasons for rejecting the merger proposal, which may be entirely valid, such as wanting a larger cash exit initially or regular exit opportunities going forward.”
Meanwhile Saba said: “By pushing for a merger that benefits Baillie Gifford rather than shareholders, EWI’s board has confirmed where its loyalties truly lie. Shareholders deserve a board that puts them first—not another cosy deal that entrenches an unaccountable manager.”
The problem with privates
The failed tie-up between HICL Infrastructure PLC Ord (LSE:HICL) and Renewables Infrastructure Grp (LSE:TRIG) has highlighted the need for merging trusts to have complementary approaches.
There is already significant overlap between EWI and USA: a market announcement from the latter pointed to a “high commonality” between the two.
“As at 30 November 2025, EWI’s assets had around 75% North American geographical exposure, were around 22% invested in private companies and included eight investments in common with USA, accounting for around 31% of EWI’s assets,” it said. Both have a penchant for growth companies and private businesses, notably Elon Musk’s SpaceX.
The exposure to unlisted companies means the trusts could not simply convert to an open-ended structure to appease Saba, as Fundsmith vehicle Smithson Investment Trust Ord (LSE:SSON) is seeking to do. The private exposure also limits the extent to which the trusts can offer cash exits.
As with HICL and TRIG, not all investors might favour such a merger.
James Carthew, head of investment company research at QuotedData, said: “I have to say that I am with Saba on this one.
“The whole point of persevering with EWI is that small caps are out of favour globally. I want to hold it for the eventual global small-cap recovery. I don’t hold USA and don’t want to. If the merger did go ahead, I would be ticking the cash exit box.”
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