Impax Environmental Markets (LSE:IEM) has proposed an exit tender offer, allowing shareholders to sell up to 100% of their ordinary shares, in response to obstruction from Saba Capital, its largest shareholder.
This new offer has been proposed after a previous continuation tender offer was cancelled at the end of last month due to 22% shareholder Saba declining to participate, which prevented the conditions from being met.
Impax is the second investment trust to propose an exit tender offer, after Edinburgh Worldwide made a similar proposal after a battle with the US activist investment firm led by Boaz Weinstein. Saba proposed a boardroom takeover at Edinburgh Worldwide that investors rejected.
Glen Suarez, chairman of Impax Environmental Markets, noted that shareholders at last year's annual meeting had overwhelmingly endorsed the continuation plans and long-term environmental markets strategy but with Saba having since increased its holding, this has presented "a significant challenge to IEM's stability and mandate because Saba does not share a belief in the company's objectives".
After months of engaging with shareholders to try and balance competing objectives, the continuation tender offer was seen as "the only option to reconcile these differing objectives", providing all shareholders with the opportunity to exit at close to NAV, while preserving IEM's specialist strategy for those wishing to remain invested.
The board continued to engage with Saba, he says, including securing a financial contribution from manager Impax to enhance the terms for all shareholders, but Saba still declined.
"Having exhausted every reasonable alternative and having received no guidance from Saba as to its voting or tendering position, the board has been forced to act to protect non-Saba shareholders from the possibility of becoming trapped in a Saba-controlled company where Saba could have the power to change the strategy, objectives, and even the mandate."
The board has urged all shareholders to vote in favour of the exit tender offer at the forthcoming general meeting, with the directors intending to tender all their shares.
Richard Stone, chief executive of the Association of Investment Companies (AIC), said: “It’s infuriating that we could lose both Impax Environmental Markets and Edinburgh Worldwide because of one minority shareholder.
"Saba has thwarted the interests of the majority of shareholders. They have refused a cash exit, and their actions suggest they are bent on taking control of these companies. But the majority of shareholders have voted for the continuation of these investment trusts in their current form.
“We need policymakers, regulators and the Takeover Panel to take action to prevent a minority shareholder from dictating the future of an investment trust and taking control of its management contract against the interests of other investors.
"The priorities should be to protect board independence, strengthen the rules around conflicts of interest, and rethink the related parties rules.
“Impax Environmental Markets and Edinburgh Worldwide are both FTSE 250 companies and highly valued by their shareholders. Losing these companies would be a blow for the London stock market and British investors.”