Herald launches tender to offer Saba exit route, shares spark

(Sharecast News) - Shares in Herald Investment Trust surged on Friday after the fund unveiled a two-stage plan to enable New York activist hedge fund Saba to make a cash exit while also making sure other shareholders do not find themselves stuck in the trust if Saba eventually takes control. Saba has twice tried and failed to replace Herald's board and alter the company's strategy.

Herald announced a tender offer for all shareholders, allowing them to cash out all their shares at close to net asset value in an attempt to resolve the impasse with Saba, which holds 30.7% of the £1.2bn fund.

The offer is conditional on Saba tendering all or substantially all its shares. It if declines, Herald will proceed with a "backstop tender offer" that only requires a simple majority to pass, ensuring shareholders still have the opportunity to exit before any possible change of control.

"It is not sustainable to do nothing given the risk that Saba, through attrition, may eventually win a simple majority. This proposal offers a full and fair choice: to stay with Herald's proven investment approach or exit at close to NAV," said chair Andrew.

"The (Herald) board wishes to serve the interests of all shareholders, while recognising that differing groups of shareholders have very different objectives for their investments," Herald said in a statement.

"This disparity, and apparent lack of alignment in shareholders' investment horizons, has proven disruptive for the company's manager, which feels inhibited in committing to new long-term investments with promising technology and communications companies, particularly given the relative illiquidity of smaller quoted companies' shares."

"These challenges within the company's shareholder base are also an obstacle to attracting new shareholders."

Saba has been steadily building substantial stakes in several investment trusts over the past two years, pushing for changes to narrow their discounts to net asset values and in some cases resolutions to sack their boards and take control, the Times newspaper reported on Friday.

Another example of resistance to its activism was revealed on Friday when Edinburgh Worldwide Investment Trust said independent voting adviser Glass Lewis has recommended that shareholders vote against all of Saba Capital Management's resolutions at the general meeting on January 20.

Saba, which owns just under 30% of EWIT, has called for the trust to oust its entire board - six directors - and replace them with three of its own US-based nominees.

"We are pleased to note the conclusions of Glass Lewis and ISS who both recommend that shareholders vote against all of Saba's resolutions. We are also pleased to see Legal & General come out to publicly support the board and its intention to vote against all of Saba's proposals," said EWIT chair Jonathan Simpson-Dent said.

Reporting by Frank Prenesti for Sharecast.com