Second trust looks to smoke out Saba via 100% tender

Saba Capital target Impax Environmental Markets Ord (LSE:IEM) wants to tender up to 100% of its shares in an attempt to oust the “relentless” US activist, making it the second trust to attempt a strategy originally taken by Herald Ord (LSE:HRI).

• Invest with ii: Trade Investment Trusts | Cashback Offers | Open a Trading Account

The trust, which looks to benefit from the growth in markets for “cleaner or more efficient delivery of basic services of energy, water and waste” but has suffered from poor performance in recent years, said it planned to propose a tender offer for up to 100% at close to net asset value (NAV).

“After exhausting every reasonable alternative to protect our shareholders, the board has been left with no choice but to propose the continuation tender offer, contingent upon Saba’s full participation, in response to Saba’s relentless pursuit of short-term objectives at the expense of IEM and the wider UK investment trust sector,” said trust chair Glen Suarez.

The tender will not proceed if Saba, which has a 20.7% position in the trust, fails to tender all, or “materially all”, of its shares, although in that case the trust will go ahead with a smaller tender.

“In these circumstances the board will put forward a second tender offer, also for up to 10%. of the company’s share capital, to be approved by way of an ordinary resolution,” the board said.

“The board will only propose the exit tender offer to the extent it is necessary to offer shareholders a means by which they can exit all, or substantially all, of their holdings in the company, which the board believes is being targeted by Saba, an activist with a short-term investment horizon which potentially has the aim of controlling the company’s strategic direction and assets,” the announcement added.

• Investment outlook: expert opinion, analysis and ideas
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
• Nick Train investment trust survives continuation vote

A tender offer at close to NAV could provide shareholders with an immediate profit, given that the trust’s shares traded at a discount of close to 9%. But with the struggling trust’s shares down by around 10.5% over five years, some investors could still be swallowing a loss.

Impax’s announcement comes hot on the heels of Herald announcing (on 12 January) a tender offer for 100% of its shares, arguing that it “is not sustainable to do nothing given that a process of attrition may eventually see Saba able to win a simple majority vote even though it itself is a minority shareholder”.

Herald will seek shareholder approval for the tender offer at a general meeting on 5 February.

Will Saba accept?

Multiple trusts still count Saba as a major shareholder, and the activist has proved a headache even for boards that enjoyed a victory against it last year.

Saba nearly succeeded in blocking the reinstatement of the Baillie Gifford US Growth Ord (LSE:USA) board last year and is, once again, attempting to oust the board of Edinburgh Worldwide Ord (LSE:EWI).

Other trusts have already successfully removed Saba via tender offers, offering some hope for these two names. Big tender offers could be tricky for any Saba targets that hold illiquid assets, however.