Schroder UK Mid Cap fund will launch a tender offer in what activist investor Saba Capital has called a “significant liquidity win” for shareholders.
The investment trust has reached agreement with Saba, which is the largest shareholder in the fund, to tender its shares.
Harry Morley, chair of Schroder UK Mid Cap Fund plc, said: “We are pleased to have reached agreement with Saba to facilitate their exit, allowing us to focus on our differentiated proposition going forward.”
The directors will not tender their shares and three directors have committed to purchasing additional shares.
The board said it will implement a “discount management policy” aimed at maintaining a mid-single digit discount in normal market conditions with a view to minimising discount volatility to those shareholders who remain invested.
It is currently trading at a discount of 5 per cent and has been at an average discount of 5.1 per cent this year.
The deal with Saba also includes a three-year standstill agreement under which Saba has agreed not to take action regarding the trust for three years.
Boaz Weinstein, founder and chief investment officer of Saba, said: “After more than a decade trading at a discount, [Schroder UK Mid Cap] shareholders now have the opportunity to exit at net asset value.
“This is what happens when boards listen to shareholders and engage constructively.
“It is more than just a victory for all Schroder UK Mid Cap shareholders — it is further evidence that the positive transformation of the UK investment trust industry is accelerating.”
Fund manager Jean Roche said the investment trust would continue to “unearth” opportunities in the UK mid cap market.
She added: “Valuations have rarely been more attractive as evidenced by a spate of recent M&A approaches for companies in the universe, together with a very high incidence of share buybacks, underlining the uniqueness and/or cash generative nature of these companies.”
tara.o’connor@ft.com
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