Three months after activist Saba Capital appeared with a 5.7% stake, the £445m infrastructure investor announces a package of shareholder-friendly measures.
Utilico Emerging Markets (UEM), the £445m infrastructure and utilities investor in which activist Saba Capital recently emerged with a stake, is to bring forward its continuation vote as part of a new five-year performance-related tender offer.
The investment trust, which launched 20 years ago, will let shareholders vote at next month’s annual general meeting on whether the company should continue. This is a year earlier than planned in order to align it with a new conditional tender offer which will enable shareholders sell up to 25% of the company’s shares if its investment performance fails to beat the MSCI Emerging Markets Total Return index in the five years to 31 July 2030.
In addition, the company will target a single digit discount with its share buybacks. The shares currently trade 12% below net asset value, having seen the valuation gap narrow slightly since Saba disclosed a 5.7% position in May. UEM said it had bought back over £62m of its shares in the three years to 31 March.
The board has also reaffirmed its commitment to pay a progressively rising dividend. It paid 9.125p per share last year and yields 3.7%.
Winterflood analyst Alex Trett said: “We suspect that this action may have been prompted by the presence on the share register of activist investor Saba Capital Management, who disclosed a 5.7% stake in UEM in May. Nevertheless, we welcome the board’s decision to adopt a proactive approach to discount control, as we believe that addressing the discount through multiple mechanisms is firmly aligned with shareholders’ interests and reflects strong governance.”
Investors were also pleased with the shares rising 2.4%, or 6p, to 251p.
Under lead manager Charles Jillings, UEM has delivered an annual investment return of 9.1% since launch, growing net asset value by a total 470.6% compared to the 349.7% return from the MSCI Emerging Markets index.
With ICM co-manager Jacqueline Broers, the five-year total investment return to the financial year-end of 31 March was 67.2%, also ahead of the benchmark’s 40.8%. The board expressed its confidence that NAV returns would continue to outperform. Both managers spoke to QuotedData in two of our weekly “In the Hot Seat” shows last month. You can watch Jillings here and Broers here.
Chair Mark Bridgeman said: “The package of measures we are introducing is intended to enhance shareholder value and provide greater transparency, whilst also enabling the investment managers and the board to focus on delivering a strong long-term performance through our differentiated emerging markets strategy. We thank our investors for their continued support of the company and look forward to continuing our long-term track record of outstanding returns.”
Our view
QuotedData’s head of investment company research, James Carthew, said: “Utilico Emerging Markets has been updating us on its progress in recent weekly shows. We believe it offers investors something genuinely different from other emerging markets trusts. With cracks appearing in the US economy and a weaker US dollar, investors are broadening their horizons. History suggests that emerging markets funds can do well in such an environment. The early and regular continuation vote, conditional tender, and commitment to a progressive dividend are a welcome development.”
