Edinburgh Worldwide says Saba overpromises as tussle continues
Edinburgh Worldwide Investment Trust PLC on Tuesday responded to an ‘enhanced liquidity proposal’ from activist investor Saba Capital Management LP.
The FTSE 250-listed investment firm has been locked in a dispute with its largest shareholder for over a year, as have several of its peers, which appears to have prompted a regulatory review by the UK Financial Conduct Authority.
New York-based hedge fund Saba owns around 30% of EWIT, and on Monday, it proposed an offer which gives shareholders three options. This follows EWIT’s announcement earlier this month of its own tender offer.
Under Saba’s proposal, which is contingent on the election of a new Saba-nominated board, EWIT investors can tender their shares immediately and exit at net asset value less costs. Alternatively, they can tender following a potential SpaceX initial public offering or liquidity event - but prior to any potential change in investment mandate - at NAV less costs. The final option is for investors to retain their EWIT holdings.
EWIT shares rose 1.2% to 215.50 pence on Tuesday afternoon in London and are up 37% over the past 12 months.
According to the FTSE 250 listing, Saba’s statement appears to be ‘designed to confuse and mislead shareholders’. EWIT stressed that ‘Saba has no authority to mandate strategic alternatives’, saying: ‘Saba’s latest statement promotes outcomes it cannot itself deliver and should not be presented as credible proposals.’
EWIT added that Saba had not clarified how its proposal would help investors avoid capital gains taxes. Saba on Monday described its offer as ‘designed with tax efficiency in mind.’
‘For any shareholder carrying embedded gains in EWI, tendering under the current board’s proposal could unnecessarily crystallise a capital gains tax liability. To do so now, simply because EWI Chairman Jonathan Simpson-Dent has created a sense of urgency around his own removal, would be an own goal,’ Saba had said.
Last month, Saba had proposed three new directors for its investee, which EWIT Chair Jonathon Simpson-Dent decried as an attempt ‘to take control of the company’.
At a meeting in January, 93% of EWIT shareholders, excluding Saba’s voting rights, rejected Saba’s proposals to replace the EWIT board. Saba had attempted a similar crusade a year earlier, which also failed.
‘Shareholders should not be fooled, we have been here before,’ commented Simpson-Dent on Tuesday.
‘If Saba wants to offer superior value, it should follow established market practice and make a formal takeover offer to all shareholders, including an appropriate control premium and fair value for the company’s stake in SpaceX.
‘Instead, shareholders are being presented with proposals that introduce uncertainty, and which Saba itself does not have the ability to deliver.’
Simpson-Dent urged shareholders to vote for EWIT’s own tender offer ahead of the April 8 deadline.
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