The Baillie Gifford-managed £860 million Edinburgh Worldwide Investment Trust plc (EWIT) told shareholders on Monday its controversial tender offer for up to 100% of EWIT’s issued share capital “is being carefully timed to pre-empt the high probability that Saba Capital is likely to succeed in imposing its new board at the next AGM.”
EWIT has been facing a third attempt by New York hedge fund Saba Capital Management to oust the Edinburgh Worldwide board and elect three new directors nominated by Saba.
The fund has strongly recommended that shareholders vote in favour of the tender offer.
“Saba has confirmed that it expects the new board to appoint a new manager, which will result in a change in the investment mandate for EWIT,” said EWIT on Monday.
“The board believes the Tender Offer offers holders the chance to realise value, whilst retaining exposure to any future upside in the company’s largest investment, Space X.”
EWIT said its tender offer aims “to provide eligible shareholders with the opportunity to receive a significant initial cash exit and also retain access to the potential future value from EWIT’s largest shareholding, SpaceX.”
The investment trust urged shareholders: “If you wish to tender your shares and exit the company before Saba potentially takes control, you must take two separate actions.
“VOTE FOR the Tender Offer as soon as possible.
“ELECT TO TENDER 100% of your shares at the same time
“Your vote is critical.
“The directors of EWIT intend to vote for the Tender Offer and will elect to tender all of their shares.
“The General Meeting is due to take place on 10 April. More details on the General Meeting, a guide to voting and tendering can be found on the EWIT website.”
EWIT chair Jonathan Simpson-Dent wrote to shareholders: “Your trust remains under persistent attack from Saba. Together, we find ourselves at a defining moment regarding the future of Edinburgh Worldwide.
“Over the last two years, your Board has been relentlessly focused on validating and evolving the strategy of this unique trust to unlock the performance that you rightly expect. Our Path for Growth strategy is delivering – your investment is now worth significantly more than it was two years ago.
“During this period of turnaround and renewed momentum, your Board has also had to confront repeated attempts by Saba to take control of the Company. Your Company today is owned by two very distinct shareholder groups with fundamentally different objectives.
“Twice now, the majority of non-Saba Shareholders have made their position clear, endorsing Edinburgh Worldwide’s unique and exciting mandate and rejecting the alternative offered by Saba.
“Saba has confirmed its intentions and its control agenda …
“Saba has confirmed its objectives in our recent discussions. It wants a new board which it expects to appoint a new manager.
“Saba has a clear desire to assume control of the Company’s management in order to pursue its own commercial objectives and to alter the investment mandate away from long-term global technological innovation and into what we understand will be opportunistic investment trust discount trading.
“Saba will not back down until it has broken the status quo and grabbed control of the Company’s agenda and future direction.
“The regulatory framework will not protect you in this situation …
“Under existing rules and legislation, a minority shareholder like Saba is not prevented from replacing an entire board with its own nominees who can then appoint their proposer as manager without proper conflict of interest scrutiny.
“While we have helped to galvanise the FCA into a review of these issues, any regulatory reform that creates a more democratic framework for shareholders will take time to implement, well beyond the short and repeated cycles of Saba’s attacks.
“A change of control is highly probable …
“The Tender Offer we are proposing is carefully timed to pre-empt the high probability of a change of control in the coming weeks that would take your Company down a very different path. Our detailed analysis concludes that Saba is likely to succeed in imposing its new board at the Company’s AGM which has to be held before the end of April. Shareholders must ask themselves – is this the future you want for your investment?
“Your board believes you have a right to choose …
“This Tender Offer gives you a choice. Do you want to realise value from your investment before a likely change of control, or do you want to remain invested and see how the Company evolves under Saba’s influence and control.
“Our proposed Tender Offer gives you the freedom to opt out, to take a significant initial cash exit, while importantly retaining exposure to any future upside in the Company’s largest investment, SpaceX. The same cannot be said for the proposed Saba tender offer which we believe means you will be expected to walk away from SpaceX at its previous valuation.
“All other reasonable options with Saba have been exhausted …
“This is not a situation your Board wished to reach. Shareholders have already expressed their views twice, and the Board has exhausted every reasonable and equitable solution with Saba. While it is clear that most of you did not want this outcome, Saba’s continued actions as a minority shareholder are exploiting weaknesses in the regulatory framework in order to force a fundamentally different direction for the Company.
“We can only hold back the tide for so long and we believe we are now at the end of the road – this decisive solution gives you a choice to opt out. This Tender Offer represents the culmination of all other avenues being explored and reflects our expectation that a change of control is likely in the very near future.
“You need to take action now if you want the option to tender your shares …
“You need to act twice. First, you need to vote for the tender. You will only have the opportunity to take advantage of this offer and to opt out if more than 50 per cent of votes cast at the General Meeting support the proposal. Given Saba’s 30 per cent. shareholding, achieving this will require strong participation, at least comparable to the turnout in January.
“Second, you need to consider your own position carefully. Do you want to remain invested under Saba’s control, or do you want an option to get out now at a fair value?
“Your Board recommends that you vote in favour of the tender …
“The Board believes that this Tender Offer and the Resolution to be proposed at the General Meeting are in the best interests of the Company and of its Shareholders as a whole.
“Accordingly, the Board unanimously recommends that Shareholders VOTE IN FAVOUR of the Resolution to be proposed at the General Meeting (regardless of your intention to tender your Shares).
“I, along with all of the directors, intend to vote in favour of this proposal and to tender all of our shareholdings.
“Whether, and to what extent, you choose to do the same will depend on your individual financial and tax circumstances, your views on the Company’s prospects, and your investment priorities.
“A defining moment.
“End the Saba uncertainty.
“Vote FOR the tender offer.”