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Baillie Gifford US Growth Trust PLC and Edinburgh Worldwide Investment Trust PLC on Tuesday outlined a proposed merger, but the tie-up was derailed by activist investor Saba Capital Management LP. Saba owns 29% of Baillie Gifford US Growth, as well as some 30% of Edinburgh Worldwide, and without its support, a deal cannot get over the line. In a statement on Tuesday, Saba hit out at the proposed deal. ‘By pushing for a merger that benefits Baillie Gifford rather than shareholders, [Edinburgh Worldwide’s] board has confirmed where its loyalties truly lie. Shareholders deserve a board that puts them first - another cosy deal that entrenches an unaccountable manager,’ Saba said. Baillie Gifford US Growth Trust shares were down 0.3% at 279.31 pence in London on Tuesday afternoon, giving it a £773.4 million market capitalisation. Edinburgh Worldwide shares were down 0.6% to 203.71p for a £705.9 million market value. Baillie Gifford US Growth said: ‘The directors firmly believe that the merger would be in the interests of all shareholders, including Saba. However, due to the size of its holding, Saba is able to block the requisite shareholder approvals. Notwithstanding Saba’s lack of support for the merger, the board would like to consult with shareholders more broadly on their views.’ The proposed combination would have continued to invest predominantly in listed and private US firms. It would be managed by Baillie Gifford & Co Ltd, which currently manages both. Edinburgh Worldwide invests in companies that it believes operate at the ‘frontiers of technological innovation and transformation’. Its portfolio includes Elon Musk’s Space Exploration Technologies Corp, or SpaceX. Baillie Gifford US Growth invests in US growth companies and its holdings include Nvidia Corp, Amazon.com Inc and Netflix Inc, as well as SpaceX. The proposed deal had a cash exit option of up to 40% of the issued share capital of the firms, and at a ‘narrow discount’ to net asset value. In addition, there would have been a ‘significant contribution’ from Baillie Gifford towards the costs of implementing the tie-up amid a ‘management fee waiver’. Baillie Gifford US Growth Trust Chair Tom Burnet said: ‘We are highly disappointed that Saba has chosen once again to impede other shareholders by blocking the board from credibly presenting a potential merger opportunity that would result in a materially improved position for shareholders of both companies. This potential merger opportunity includes the offer of substantial liquidity for those shareholders who wish it. ‘I and my fellow directors have always been very clear: we want to protect and create value for all our shareholders. That is our priority. We want to be able to put proposals for a way forward which are fair and equitable to all our shareholders. The board remains determined in its commitment to act in the interests of shareholders as a whole.’ The combination would have been implemented through a scheme of reconstruction of Edinburgh Worldwide Investment. ‘The board believes the proposed merger has strong strategic and financial merit, offering both sets of shareholders a compelling ongoing investment proposition together with a cash return option. The merger would deliver,’ Edinburgh Worldwide Investment said. ‘Saba immediately rejected the proposed merger. Instead, Saba reiterated its ongoing desire for a change of board and a review of the company’s future.’ Saba, which owns around 30% of Edinburgh Worldwide, last week in an open letter said it was ‘profoundly disappointed’ by the investment trust’s performance. Saba said: ‘We remain profoundly frustrated by the board’s prolonged inertia, especially given the decisive actions taken by the boards of several other UK investment trusts to increase share prices and narrow persistent discounts to NAV. We do not have faith in the current board’s ability to implement the necessary strategic changes. As the company’s largest shareholder, we feel a duty to our fellow shareholders to drive this essential change. ‘Therefore, we will requisition a general meeting of the company to remove the entire incumbent board and, in its place, appoint a new board composed solely of qualified, independent directors who are committed to delivering long-term value for all shareholders.’ In response, Edinburgh Worldwide said the letter ‘does not represent the significant progress EWIT has made since this board reset the company on a path for growth a year ago’. Edinburgh Worldwide noted on Tuesday that growth path includes rebalancing the portfolio so it focused on fewer holdings and more ‘profitable, cash-generating companies’. It also included a share buyback and capital return programme of up to £130 million. ‘The board is pleased with the progress achieved against this plan,’ Edinburgh Worldwide said on Tuesday. It said its financial adviser met with Saba to try to secure backing for the Baillie Giifford US Growth deal, though ‘Saba immediately rejected the proposed merger’. ‘Saba’s response indicates to the board that Saba’s ultimate objective is to gain control of the company without offering a control premium, thereby trapping the remaining 70% of shareholders in a company run for the exclusive benefit of its largest investor. This is not Saba’s first attempt to take control. In February 2025, Saba’s proposal to seize control of the company was overwhelmingly rejected by 98.4% of voting non-Saba shareholders,’ Edinburgh Worldwide said. ‘Given the compelling strategic rationale for the proposed merger, the board will seek to continue its discussions with Saba in an effort to persuade them of the benefits to all shareholders and to them, including the option for a cash exit. Without Saba’s support, the proposed merger cannot progress. The board also welcomes any comments from other shareholders and will provide a further update in due course.’ Copyright 2025 Alliance News Ltd. All Rights Reserved.
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