James Carthew: Herald’s Saba retaliation is an existential gamble
Herald’s 100% tender could either remove its unpredictable top shareholder or spell the end of a decades old trust with a great track record.
A year has passed since Saba’s resounding defeat in its attempt to seize control of Herald (HRI). Last January, when HRI shareholders were asked whether they wanted to replace the existing board with one of Saba’s choosing, only 0.15% of the votes cast sided with it.
This set the tone for a similar pattern at the votes of the other six trusts targeted by the activist. You might have thought that it would have learned its lesson and changed its tactics, but no.
Saba has refused to sell stock to HRI’s share buybacks and so now has a 30.7% stake in the company. HRI is still burdened with a dominant, unhelpful, and unpredictable shareholder.
The danger of that was illustrated by the near miss of Saba’s attempt to oust the Baillie Gifford US Growth (USA) board at its AGM last October. The turnout at the AGM was just 58.9% of USA’s shares in issue. Saba voted against a number of resolutions and the board was only re-elected by a 51.7% to 48.3% vote and a special resolution to permit share issuance was blocked.
HRI’s manager is weary of this uncertainty and feels that its ability to take a long-term view – the core attraction of the investment trust structure – has been compromised. That is bad news for all of HRI’s investors.
In a bid to resolve this, HRI has proposed a choice of two tender offers. Both provide a 100% exit for those shareholders who want it… read more here