Saba blocks Edinburgh Worldwide merger with Baillie Gifford US

Activist investor Saba Capital has blocked the merger of Edinburgh Worldwide (EWI ) with its stablemate Baillie Gifford US Growth (USA ).

EWI said Saba, its largest shareholder with a 30% stake in the £820m trust, ‘immediately rejected the proposed merger’ despite offering shareholders a cash exit.

Instead, the New York hedge fund reiterated its ‘ongoing desire for a change of board and a review of the company’s future’.

The board of EWI said Saba’s response indicates its ‘ultimate objective is to gain control of the company without offering a control premium, thereby trapping the remaining 70% of shareholders in a company run for the exclusive benefit of its largest investor’.

Saba has been a thorn in EWI’s side this year, having first attempted to take control via a requisition vote in February that was roundly rejected by 98.4% of non-Saba shareholders.

Last week, Saba flagged its intention to requisition a second general meeting to fully remove its board, citing poor returns and inadequate buybacks.

EWI maintained there was a ‘compelling strategic rationale for the proposed merger’ with the £868m USA fund run by Gary Robinson and Kirsty Gibson, and it will continue to try and persuade Saba of the benefits. Without the activist’s support, the merger cannot progress.

Jonathan Simpson-Dent, chair of EWI, said the trust has made ‘strong progress’ since resetting on a ‘path for growth a year ago’.

‘We are confident that today it offers shareholders a distinctive portfolio of high-growth companies that would be extremely difficult to access elsewhere in the market,’ he said.

The merger with USA would ‘accelerate value for shareholders’ through the creation of a larger, more liquid trust, while also retaining exposure to ‘disruptive and transformative companies’.

‘Crucially, it would also provide a fair cash exit for those, such as Saba, whose agendas may differ,’ he said.

Simpson-Dent said the board had made ‘numerous attempts’ to talk to Saba about its objectives in a bid to find ‘an equitable and holistic solution’, including a merger with USA.

However, its lack of support suggests it is only interested in taking control of the trust ‘for its own commercial gain’.

‘The board will make every effort to continue the engagement with Saba in order that we can find a solution to the current impasse and focus exclusively on maximising value for all of our shareholders,’ Simpson-Dent added.

EWI has been subject to an overhaul since early 2024, which included a rebalancing of the portfolio to focus on fewer holdings and oust underperforming stocks.

There was also a shift to more profitable, cash-generating companies, and the market-cap limit was raised from $5bn, which was set a decade ago and no longer aligned with the size of the companies on the S&P Global Small Cap benchmark.

Since then the board has undertaken a £130m share buyback programme as it aims to  limit the discount to net asset value (NAV) to single digits.

Under these changes, EWI has delivered a NAV total return of 16.8% over one year, ahead of the 6.2% achieved by the index, while the discount has narrowed to 4.4% − substantially smaller than the 10.8% average discount in the Global Smaller Companies peer group.

However, this has not been enough for Saba boss Boaz Weinstein, who has been ‘profoundly disappointed with the share price performance of the company for some time’.

This year the shares have risen just under 5% this year but have slid 35% over five years.