Herald Investment eyes backstop tender, other alternatives to Saba

Herald Investment Trust PLC on Friday said it will proceed with a backstop tender offer if it cannot reach ‘a mutually agreeable solution’ with activist investor Saba Capital Management LP.

The London-based investor in smaller, quoted technology and communications companies had proposed a tender offer back in January, in response to Saba’s efforts to ‘gain control of the board or the management of the company,’ in Herald’s view.

This tender offer was blocked by Saba, however, which owns around 30.7% of Herald.

Saba has attempted to remove Herald’s board twice, initially by calling a general meeting in January 2025, and then by voting against the company’s continuation and director re-elections. Both attempts were thwarted by lack of support from other shareholders.

Herald on Friday stressed that it continues to seek ‘a mutually agreeable solution with Saba which would offer shareholders a choice of outcome.’

‘If a mutually agreeable solution is not achieved, the board will proceed with the backstop tender offer pursuant to which eligible shareholders will be entitled to tender up to 100% of their holding at a price close to the [net asset value] per share as at the time of the exit,’ Herald said.

According to Herald, the majority of non-Saba shareholders ‘have no wish to be in a Saba controlled vehicle, and the board understands from discussion with shareholders to date that many would like to remain invested in the company’s current mandate, or, if not, in another suitable investment company.’

Herald also acknowledged that shareholders may face ‘an unwanted tax event’ if the tender offer proceeds and they realise their investment in the company.

‘The board believes that it may be possible to enable shareholders to remain invested in a non-Saba controlled vehicle in a tax-efficient manner, whilst also offering shareholders a significant cash exit opportunity, and the board is working on that possibility,’ Herald said.

‘If this is confirmed, further details will be published in due course.’

The company stressed that there is no certainty that this ‘tax efficient alternative structure will be possible’.

Herald added that it ‘has been raising the liquidity profile of the company’s portfolio’ against the backdrop of the backstop tender offer.

‘The resultant need for liquidity led to the board and the investment manager agreeing to an accelerated programme of selling portfolio holdings, including a number of less liquid stocks,’ Herald explained.

As of Thursday, cash and government bonds represented around 26% of the company’s net asset value, up from 18% a the end of February, the company noted.

Herald Investment shares fell 0.6% to 2,472.21 pence on Friday morning in London, but are up 21% over the past year.

Also on Friday, fellow FTSE 250 listing and Saba investee Edinburgh Worldwide Investment Trust PLC said that its independent advisors recommended its own tender offer to shareholders.

EWIT had warned shareholders that Saba is ‘likely to succeed’ in installing a new board at the next annual general meeting, which is due before the end of April.

Saba’s activism at EWIT, Herald and other UK-listed trusts appears to have prompted a regulatory review by the UK Financial Conduct Authority, slated to conclude later this year.

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