The chair of Baillie Gifford US Growth (USA) has attacked Saba Capital after the activist hedge fund yesterday almost removed the board of the £751m investment trust eight months after it spectacularly failed to do so in a high profile extraordinary general meeting.
Saba used its 29% stake in the trust to vote against the re-election of Tom Burnet and his three fellow non-executive directors at its annual general meeting in Edinburgh. On a turnout of just under 59% that saw 48.7% of votes cast against the chair and a similar proportion opposed to the reinstatement of Sue Inglis, Graham Paterson and Chris van her Kuyl.
That meant the board was narrowly re-elected with just over 51% of the votes at the AGM at the head office of its fund manager Baillie Gifford.
That compares to the 65.6% support the directors received in February when Saba founder Boaz Weinstein and another of his nominees failed to win election to the board.
At the time 98.5% of independent non-Saba shareholders rallied to support the trust, one of seven targeted by the US firm which wanted to take control of at least one and make it the vehicle through which it would pursue other undervalued investment trusts. Since then it has gone on to establish positions in dozens of London-listed closed-end funds trading on wide discounts. Last month it filed its intention to launch an exchange traded fund that will further its campaign.
Unlike the EGM in February, Saba did not put forward candidates to replace the directors it was seeking to eject.
Burnet said it was “disappointing” that without warning Saba had used its substantial holding to vote off the whole board. “Had they succeeded, without directors the company would have been in breach of the Companies Act, the UK listing rules and its own articles, which would have had significant consequences for all shareholders,” he said.
The chair said Saba had rejected his offer of a meeting following annual results in August which showed the trust starting to recover from a three-year stock market mauling. In the year to May it made an underlying 22.1% gain. Nevertheless, currently the shares are up just 2.7% over five years and trail at a 9% discount to net asset value.
At the AGM yesterday, Saba voted against three other resolutions with the directors’ remuneration policy and authority to allot shares also narrowly approved. However, a special resolution enabling the board to issue shares without offering them to existing shareholders first required a 75% vote to pass. It failed to do so, receiving just over 52% of votes.
The result will underline to investment company boards that they need to remain vigilant if they have Saba as a shareholder and need to encourage their investors to vote through their sharedealing platforms. The activist has taken a less public stance since its initial campaign foundered with investors also backing the boards of its six other targets. However, the fund manager has not retreated, opting for behind the scenes pressure to achieve its investment goals.
