Impax Environmental urges investors to use 100% exit to escape Saba

Impax Environmental Markets (IEM) is urging shareholders to vote in favour of its 100% tender offer to avoid being trapped in a Saba Capital-controlled portfolio.

The £933m specialist investor in clean energy, waste and water, which is the only trust in the Association of Investment Companies’ (AIC) Environmental sector, has followed in the footsteps of Edinburgh Worldwide (EWI) in formally launching its 100% tender offer.

Glen Suarez, chair of IEM, said the decision to launch the tender came after the board ‘exhausted every reasonable alternative’ to try and oust activist Saba from its share register.

Shareholders voted in favour of the trust continuing at last year’s continuation vote, but negotiations between IEM’s board and the New York-based hedge fund have proved fruitless. Saba founder Boaz Weinsteain has criticised the trust’s track record, with the board accusing the activist of upending stability in the portfolio and failing to have all shareholders’ interests at heart.

Efforts to find a ‘responsible solution that protects the interests of all shareholders’ led to a continuation tender offer launched in January that would allow investors – including Saba − to exit close to net asset value (NAV) while preserving IEM’s strategy for those who wished to remain invested.

Suarez said the board engaged with Saba to find a ‘mutually agreeable solution’, which included a ‘substantial financial contribution’ from the manager to enhance the terms of the tender, but Saba still declined, cancelling the continuation tender.

This has left an exit tender offer as the only option, giving all shareholders a chance to cash in their shares at close to NAV.

Suarez said the exit tender will protect non-Saba shareholders ‘from the possibility of becoming trapped in a Saba-controlled company where Saba could have the power to change the strategy, objectives, and even the mandate’.

To prevent this, the board is urging investors to vote in favour of the exit tender offer, with the directors pledging to tender all of their own shares, ‘underscoring our conviction that this is the right outcome for IEM’s shareholders’, said Suarez.

The exit tender offer requires more than 50% of votes cast to be in favour in order for it to pass, with the tender price being based on the final asset value of the tender pool on the determination date.

Suarez warned that shareholders remaining invested in the company, either through choice or failing to vote, will ‘be in a significantly smaller company’ with a ‘significant risk that Saba will hold a controlling interest’.

The decision by IEM follows that of EWI, which was also forced into an exit tender offer by Saba’s ongoing attempts to replace the trust’s board with its own nominees and ultimately install itself as manager, despite shareholders voting down its plans.

AIC chief executive Richard Stone said the loss of two trusts from the London Stock Exchange due to one minority shareholder is ‘infuriating’ and would be ‘a blow to the London stock market and British investors’.

Saba has refused a cash exit in both instances and ‘thwarted the interests of the majority of shareholders’ in the process, said Stone.

‘[Saba’s] actions suggest it is bent on taking control of these companies. But the majority of shareholders have voted for the continuation of these investment trusts in their current form,’ he added.

Stone said the ability of Saba to override the wishes of the majority now needs to be tackled by policymakers, regulators and the Takeover Panel to prevent ‘a minority shareholder from dictating the future of an investment trust and taking control of its management contract against the interests of other investors’.

‘The priorities should be to protect board independence, strengthen the rules around conflicts of interest, and rethink the related parties rules,’ he added.