Impax Environmental Markets (IEM) is considering its future after 77.8% of shares in the £825m investment trust were put up for sale in last week’s exit tender offer.

Analysis by the board indicates that Saba, the hostile hedge fund that was threatening to take over the company, tendered its 21% stake despite apparently not voting for the exit proposal last Thursday. Participation in that vote was low at 46.1% but was supported by an overwhelming 98% of shares that did vote.

However, in the tender offer that closed at 1pm on Friday, a total of 148,202,139 shares were tendered which means around £710m of assets will be sold and money returned to shareholders, reducing IEM’s net assets from £911m to around £200m.

Chair Glen Suarez said: “There are no winners here. This was an extraordinarily difficult situation to navigate, trying to balance the varied desires of all of our different shareholders. The overwhelming majority of shareholders voted just a year ago in favour of IEM’s continuation, but Saba made it clear in subsequent interactions with the chair that they did not agree. As a result, the board acted proactively to offer an exit to all shareholders who wished to take it.

“The board will now carefully consider all available options regarding the company’s future, and will provide a further update with the notice of AGM, to be announced shortly,” he said.

Our view

Matthew Read, senior analyst at QuotedData, said: “Viewed one way, this whole saga looks like a futile exercise. Saba forced through its agenda by overriding the wishes of independent shareholders in what appeared to be a scramble to corral assets under management, only to throw in the towel at the final hurdle by tendering the bulk – if not all – of its own holding. Yet the 100% tender has achieved one important objective: it has ensured that shareholders who could have been trapped in a Saba-controlled vehicle were given a clean route out.

“The irony is that, with Saba seemingly heading for the exit and around 22% of shareholders choosing not to tender, there now appears to be a rump with an implied market cap of roughly £185m at current discount levels. That is a far cry from the trust’s former scale, but it is not necessarily too small to survive. The question is whether the board can use this as a platform from which to rebuild the company and grow it again from here. Given the support IEM received from non-Saba shareholders, we hope that it can.”

James Carthew, head of investment company research at QuotedData, said: “Saba could have just backed the first tender, the trust would still have shrunk but by nowhere near this extent. Impax Environmental shareholders were backed into a corner and faced with a choice of cash in or run the risk of being stuck in a Saba-controlled company. I would hazard a bet that a fair few of those that tendered their shares would not have done so had they known that Saba would be exiting. The rump trust should now implement measures designed to prevent a repeat of this mess. It might, for example, be possible to implement a change to the company’s articles that says any resolution that would be regarded as a special resolution needs to be backed both by 75% of the shares voted on the resolution AND 75% of the shareholders that vote. That would prevent one or two large shareholders from forcing through their agenda against the wishes of the majority of investors.”

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