Saba Capital intends to offer Herald Investment Trust shareholders a full cash exit near net asset value, should their attempts to remove the current board be successful.
The 100% cash exit would come at 99% of the trust’s total net asset value, which currently sits at £2.5bn.
In a statement, Saba said the cash exit would be overseen by a fully independent board, which would not expect it to occur for at least a year.
The plans to offer a full cash exit come in response to shareholder feedback, the firm said.
The requisitioned general meeting, at which Herald investors will vote on Saba’s proposal to replace the board with their own nominees, will take place on 22 January.
See also: Trusts targeted by Saba campaign urge shareholders ‘take no action’
Herald responds
The Herald board responded to Saba’s announcement, noting that Saba is not proposing to offer 99% of the value of today’s net asset value.
“Instead Saba is proposing an exit after ‘at least a year’ during which open-ended time period significant value could be lost from the underlying portfolio in anticipation or consequence of Saba’s known selling appetite,” the board said in a stock exchange announcement.
They added that the board has engaged with “many shareholders”, who they say have not expressed a wish for Saba to take over the management of the company.
Andrew Joy, Herald chair, said: “Herald has delivered strong investment performance. Since the first day of dealings (21 February 1994) the Company has delivered a 27x NAV total return.
“In direct contrast to Saba’s promise of the “opportunity for greater long-term returns under a new investment strategy”, the Herald Board does not believe that Saba’s long term performance track record supports this.”
See also: IA: UK reinvests in November following two months of exits
Reacting to both announcements, QuotedData head of investment company research James Carthew said that the Herald board’s argument is “straightforward”.
“More worrying to us is the tortured logic in Saba’s statement in which it claims to know what an independent board would do at some point in the future, clearly implying that it believes that it can direct the board’s actions. We cannot get our heads around how a board consisting of Saba employees, Saba appointees, and persons that these Saba-connected directors later co-opt onto the board could ever be construed as independent.
“We iterate our belief that investors should not surrender control of these trusts to this vulture investor. Furthermore, if Saba does seize control and seeks to impose its particular investment approach on the portfolio, investors should be given an exit at NAV, not at a 1% discount.”