Herald (HRI) has issued an initial response to the requisition request from Saba Capital Management LP (you can read more on the original announcement and our thoughts on it by clicking here, and you can see other targets’ responses in a follow up article written by us yesterday here). HRI says that it has received a letter from Barclays Capital Securities Client Nominees Limited, acting as nominee of Saba, seeking to requisition to convene a general meeting of the company seeking to remove the current board and appoint two replacement directors in their place. [QD comment from Matthew Read: this proposal alone is utter madness in our view. Why would the shareholders of any of Saba’s targets want to hand over control to one dominant shareholder who can then act entirely in its own interest, rather than the collective interests of all? In HRI’s case, Saba Capital has acquired around 19% of the trust’s issued share capital but, because of the long-running issue of retail investors who hold their shares through the platforms tending not to vote, professional investors such as Saba get a disproportionate share of the vote. This is a concern, particularly for a fund such as Herald whose investments are very long-term in nature (it has a very long tail of small investments that trade infrequently) as Saba’s proposals are very short-term and look likely to erode significant value for its long-term investors if Saba is able to drive through what would amount to a fire sale for a portfolio such as HRI’s.]
HRI says that its board will make further announcements regarding the convening of a general meeting and shareholders should take no action at this time. It adds that, having now taken legal advice, it deems the requisition to be valid and, in accordance with the requirements of the Companies Act 2006 and the company’s articles of association, it will convene the requisitioned general meeting in due course. However, HRI’s board says that it does not believe Saba’s resolutions are in the best interests of shareholders and will be advising shareholders to VOTE AGAINST them.
