Shareholders in Baillie Gifford US Growth (USA) have voted 52.8% to 47.2% against Saba Capital’s resolutions to appoint three of its nominees to the board, with a similar majority backing the existing directors led by chair Tom Burnet.
Excluding hedge funds Saba and Sessa Capital, who held over 29% and nearly 8% of the shares respectively, an overwhelming majority of 99.5% independent shareholders rejected the US activist’s attempt to take control of the £1bn investment trust which has made a strong recovery from the 2022-23 crash.
Burnet said: “On behalf of the board, I would like to pass our gratitude to our independent shareholders for their continued support. Those shareholders have again delivered a clear and decisive verdict. They have overwhelmingly rejected Saba’s nominees. For the third time, they have also expressed their clear support for the current board.”
The expression of relief contrasted with an AGM where the mood among the company and its advisers had seemed downbeat.
The chair added: “Repeatedly revisiting matters on which almost all of our independent shareholders have plainly already expressed their view places an unnecessary burden on the company, diverting management time and resources from the delivery of the company’s strategy and the creation of long-term shareholder value and incurring significant costs.”
The result shows a successful effort by the board and Baillie Gifford to rouse shareholders with a high turnout of just over 82% of shares voted. This is bigger than the 78% turnout in February last year when shareholders rallied in response to an effective media campaign against Saba’s attack on USA (and six other investment trust boards). Its second attempt was at last year’s AGM.
Saba and Sessa did succeed in blocking two special resolutions regarding the disapplication of pre-emption rights and share buybacks as these required a 75% threshold to pass. The remaining 12 resolutions were ordinary votes needing a simple majority.
Looking ahead, Burnet added: “We welcome engagement with all shareholders and look forward to working constructively with Saba and Sessa with the objective of delivering a long-term solution that is in the interests of shareholders as a whole.”
This is a reference to the negotiation the board would like to have about arranging an exit for Saba. Last month the USA board revealed Saba had refused an offer from Baillie Gifford to sell its stake at 99.75% of net asset value.
Richard Stone, chief executive of the Association of Investment Companies, said: “The result underlines the importance of making sure all investors can vote, including retail investors. Once again, we call on the government to implement the recommendations of the Digitisation Taskforce without delay, including the Bill of Shareholder Rights, to make sure no investor misses the opportunity to vote on the future of their trust.”
Our view
QuotedData senior analyst Matthew Read said: “This is a victory for common sense and shareholder democracy. For the third time, Baillie Gifford US Growth’s independent shareholders have delivered an overwhelming rejection of Saba’s attempts to wrest control of the trust, with 99.5% voting in line with the board’s recommendations. Yet Saba and Sessa’s substantial shareholdings have still enabled them to block the renewal of the trust’s buyback authority, potentially frustrating efforts to narrow the discount and harming the very shareholders whose interests they claim to represent.
“There is nothing wrong with shareholder activism when it holds underperforming boards to account, but repeatedly pursuing an agenda that almost all other shareholders oppose is another matter. These battles are costly, disruptive and a distraction from the business of delivering investment returns. Hopefully, the FCA’s proposed reforms will put an end to this sort of behaviour, ensuring that shareholder democracy cannot be undermined by a determined minority. The sooner those protections are introduced, the better.”
