Workspace urges no action from shareholders as reviews Saba letter
Workspace Group PLC on Thursday acknowledged Saba Capital Management LP’s letter calling for an overhaul of its board, as it expressed optimism around its recently announced strategy.
On Wednesday, activist investor Saba, which is the the second-largest shareholder in the company with a 24.7% stake, urged shareholders to back its campaign to replace the company’s non-executive directors, arguing that Workspace’s shares continue to trade at a roughly 50% discount to net asset value.
Workspace on Thursday said it is reviewing Saba’s letter to its shareholders, and said it ‘believes in the strength’ of is strategy announced alongside its annual results on Wednesday last week.
In the letter, Saba said it has proposed a strategy focused on accelerated property disposals and share buybacks to unlock shareholder value, contrasting this with Workspace’s recently announced plan to reinvest disposal proceeds into upgrading properties to drive rental income growth.
Saba said it has identified a disposal roadmap covering 56 assets and is also advocating outsourcing property management and a more targeted refurbishment programme.
The activist investor is seeking shareholder support for six board nominees ahead of a vote on its proposals.
Saba noted that since the launch of its campaign, Workspace has appointed a new executive team, including Charlie Green as chief executive back in February, and Tom Edwards-Moss as chief financial officer in April.
Saba said the new management team presented the new strategy alongside its annual results, which detailed a ‘transformation to an earnings-focused business’.
The investor said it has ‘serious concerns’ regarding the the risks of the strategy proposed, which it explained at its heart, ‘is a capital allocation policy that reinvests disposal proceeds to upgrade properties in an effort to grow rental income over time.’
‘Even under management’s own assumptions, the plan is expected to take several years to generate meaningful earnings growth. In our view, shareholders are being asked to accept considerable execution risk, uncertain returns, and an extended investment horizon, despite the existence of a more immediate and lower-risk alternative,’ said Saba Capital.
Saba on Wednesday expressed the need for new, independent board oversight, stating that: ‘The time has come for the incumbent, non-executive directors to step aside and focus on preserving shareholder value rather than preserving their positions.’
Workspace on Thursday urged shareholders to take no action in response to the letter, adding that its ‘full and considered’ response will be communicated separately to shareholders in due course.
On Wednesday, Saba successfully ousted the board of fellow FTSE-250 listing Impax Environmental Markets PLC, replacing the board with four of its nominees.
Back in April, Saba took control of FTSE-250 listing Edinburgh Worldwide Investment Trust PLC, succeeding in ousting its board after a stand off lasting over a year.
The Edinburgh-based investment firm was among several UK-listed trusts to have been caught in disputes with Saba, which has been accused of trying to take backdoor control of various companies in which it invests.
Workspace shares were down 0.7% at 346.20 pence on Thursday morning in London, and have lost 18% over the past 12 months. Edinburgh Worldwide rose 0.4% to 290.11p, and is up 76% over the past year. Impax Environmental was trading 0.1% lower at 466.50p, and is up 26% over the past year.
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