Trust news round-up: Throgmorton, Abrdn Euro Logistics, Pantheon Int'l, Worldwide Health, RTW Biotech

BlackRock Throgmorton (THRG )

Activism

Activist investor Saba Capital has doubled its stake in the £458m UK smaller companies trust, run by BlackRock’s Dan Whitestone.

The New York-based hedge fund run by Boaz Weinstein has upped its shareholding in Throgmorton from 5% since the end of April to 10% following its latest purchase last Wednesday.

What does it mean?

The increased stake doesn’t necessarily mean anything as yet, but Saba has a history of taking underperforming and deeply discounted trusts to task.

Throgmorton currently trades at a 10% discount and has lagged the Deutsche Numis Smaller Companies ex investment companies index over the past 12 months with a share price fall of 4.9% and a net asset value (NAV) decline of 4.1%. This compares to an index rise of 7.3%.

Saba sent shockwaves through the investment trust industry at the end of 2024 after it requisitioned seven trusts in a bid to oust their boards and instate itself as manager. Although it lost all seven votes, it has had a significant impact, with trusts winding down and boards taking action to narrow persistent discounts.

Saba has not been as vocal about its targets as it was before its defeats. However, it is still quietly building stakes in a handful of trusts.

Abrdn European Logistics Income (ASLI )

Offloading assets

The £266m fund has sold four assets as part of its managed wind-down. It announced today that it has sold two warehouses in the Netherlands, located in Horst and s’ Heerenberg, for an aggregate value of €34.7 million (£30.1m). This represents a discount of around 3% to the first quarter valuation. 

The debt associated with the s’ Heerenberg asset was repaid when it matured on 30 June. This leaves the fund’s outstanding fixed rate debt unchanged from the previous sales announcement on 11 July, totalling €176.8 million with an all-in interest rate of 2.05%.

Last Friday, ASLI announced it had sold two more assets as part of its managed wind-down. It offloaded two multi-let warehouses in Germany for €66.5m (£57.6m), representing a 10% premium to the first quarter valuation.

The deal was structured to allow the associated secured debt linked to the properties of €30.2m to transfer with them. ASLI also repaid an €11m loan which expired in June.

These four sales will allow the board to make a second capital distribution to shareholders of approximately £49.5 million.

Disposals and payout

The trust is engaged in negotiations on 13 further assets, made up of individual asset sales and portfolio transactions. The board expects to exchange contracts on a number of these over the coming weeks.

Subject to the successful completion of the upcoming transactions and the repayment of associated debt, the board expects to make a second capital distribution by mid-August.

Wind down timetable

After the 13 sales that are currently in discussion are completed, the fund will only have five assets remaining. The board said these are at various stages of the sale process, and completions are being targeted from fourth quarter onwards.

What Aberdeen says

Ben Heatley, head of closed-ended fund sales at Aberdeen, said: ‘The investment manager continues to assess ongoing asset management initiatives and engage with tenants to identify opportunities where the company can enhance value in advance of potential disposals.

‘Active and direct engagement with parties interested in acquiring prime logistics space is ongoing.’

Pantheon International (PIN )

Buyback boost

The £1.4bn fund of private equity funds has allocated a further £20m to share buybacks, having already repurchased £24m of its own shares in May.

The trust bought 7.9m shares in May at a weighted average price of 299.1p, representing an average discount of 40.3% to NAV at the time of the transactions.

The board pointed to Pantheon’s wide discount, currently 36%, and said in light of anticipated cashflows it would deploy another £20m by the time it publishes its August NAV in September.

This is in addition to the £10m of share buybacks that have been allocated over the financial year-to-date. 

The fund has led the way in the private equity trust sector after kickstarting a buyback programme in 2023, in what was described as a ‘brave new world’ at the time. This encouraged other funds in the heavily discounted sector to take the plunge.

What the analysts say

The fund has spent £300m on buybacks in the past two years with little movement in the discount. Stifel analyst Iain Scouller ‘continues to wonder whether the repayment of debt or the storing up of a cash pile to do a larger tender offer later in the year may have more of an impact on the discount’.

Scouller said the buybacks were, however, having a positive impact on NAV. He believes the shares ‘continue to offer value at 313p on a 37% discount to the May NAV and our fair valuation of 350p’. This represents a 30% discount to the latest NAV.

‘With around three quarters of the portfolio denominated in US dollars, the trust is a good play for those expecting the dollar to reverse its recent decline against sterling in the months ahead,’ he said.

Worldwide Healthcare (WWH )

Annual general meeting

Over 30% of shareholders in the £1.4bn portfolio of pharma and biotech stocks voted against the re-election of chair Doug McCutcheon and board member Sven Borho, who also manages the trust alongside Trevor Polischuk, at the AGM last Wednesday.

While all the resolutions passed and the majority received votes in excess of 94%, the re-election of McCutcheon and Borho were 70% and 68% in favour respectively.

When 20% of more votes are cast against any shareholder resolution, the company is required to explain what action it will take to engage with shareholders to gain insight into the result.

Board changes

In 2022, McCutcheon was asked to extend his term on the board from three to five years by taking on the role of chair in order to oversee a renewal of the board, including the retirement and replacement of all but one member. With McCutcheon’s job done, he will retire at next year’s AGM. The process of appointing a successor is already underway.

RTW Biotech Opportunities (RTW )

Realisation

Verona Pharma, a respiratory drug group held by the £429m trust, is to be snapped up by pharma giant Merck for $107 per share in a deal worth $10bn which was announced last Thursday.

The price represents a 23% premium to Verona’s closing price on 8 July, prior to the announcement. The deal is expected to close in the fourth quarter of the year.

As of 8 July, the trust’s stake in Verona was valued at $8.6m and represented 1.4% of the portfolio.

The deal is Merck’s largest since its 2023 purchase of Prometheus Biosciences for $10.8bn, which was the trust’s largest portfolio holding at the time and biggest contributor to NAV in 2023.

What the manager says

RTW Investments’ chief investment officer and manager of the fund Rod Wong said the latest purchase by Merck is ‘a powerful validation of our long-held thesis: that small and mid-cap biotech companies represent fertile ground for transformative innovation. Large pharma must increasingly look to these emerging players to replenish and diversify their pipelines’.

‘We’re proud to have invested in both companies and see this as further evidence of the compelling M&A opportunity landscape in biotech,’ he said.

‘This acquisition aligns with our commitment to supporting groundbreaking advancements in healthcare and delivering value to our shareholders.’