Impax offers escape from Saba - but a second option exists

The Impax Environmental Markets Ord (LSE:IEM) board is offering shareholders a way out after reaching an impasse with activist investor Saba Capital - but has failed to highlight a second option available to them. 

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The board has recommended an exit tender offer, conditional on approval from 50% of shareholders, that would allow investors to get out at close to net asset value (NAV), after Saba blocked the original plan for a different tender. 

But in an unusual development the market announcement outlining details of the tender hasn’t pointed to the fact that the open-ended Impax Environmental Markets (IE) GBP X Acc fund, which follows the same strategy as the trust, is seeking to keep some of those investors by offering a new share class with a lower (and temporarily waived) fee.

The two funds are managed almost identically, while investors who choose to switch into the open-ended fund will have access to a new Z share class with an annual management charge of 0.65%, slightly cheaper than the current standard class. Investors will also benefit from a six-month fee waiver. 

The trust’s board declined to comment on why it hasn’t recommended that investors roll over into the open-ended vehicle. But we understand that some view it as very different from the trust in areas such as “tax, governance and leverage”. The trust currently has gearing of around 9%.

Another Saba impasse

Saba owns around 22% of shares in the trust, and the IEM board said that it had now been “forced to act to protect non-Saba shareholders from the possibility of becoming trapped in a Saba-controlled company where Saba could have the power to change the strategy, objectives, and even the mandate”. The shares recently traded at a discount of around 5% to NAV. 

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The trust has followed in the footsteps of Herald Ord (LSE:HRI), which also failed to secure Saba backing for a tender and has so far been attempting to discuss other options with the activist. Followers of the saga will also note that Edinburgh Worldwide Ord (LSE:EWI) unveiled plans for its own tender last week. 

While the Impax trust claims that it is forced to act in the interests of shareholders via this latest tender, Saba has reiterated a claim that it would have participated in the original tender offer as long as Impax had agreed to pay the costs for those who wished to exit. 

“Impax’s refusal to reimburse this small stamp duty is the only thing standing in the way of Saba tendering our shares,” they said.