LONDON: The board of Baillie Gifford US Growth Trust (BGUS.L) said on Tuesday that activist hedge fund Saba Capital Management has moved to block a proposed “transformational merger” with a sister fund, scuppering a deal that would have offered shareholders a cash exit and a refined investment strategy.
The trust said it had been in advanced discussions to combine with the Edinburgh Worldwide Investment Trust (EWIT.L) in a move that had been “substantively agreed” between the two boards. The deal would have allowed shareholders in both companies to cash in up to 40% of their holdings at a narrow discount to net asset value (NAV).
However, Saba, which holds a 29% stake in Baillie Gifford US Growth Trust, advised the board it would not support the transaction at a meeting on Dec. 1. Due to the size of its holding, Saba can single-handedly block the requisite shareholder approvals.
“The Directors firmly believe that the merger would be in the interests of all shareholders, including Saba,” the trust said in a statement. “Notwithstanding Saba’s lack of support… the Board would like to consult with shareholders more broadly on their views.”
The announcement marks the latest escalation in a protracted battle between the trust’s independent board and Saba, which has repeatedly sought to replace the directors and change strategy.
BACKGROUND OF HOSTILITIES
In December 2024, Saba requisitioned a general meeting to replace the board with its own nominees, a move that was “resoundingly defeated” in February 2025 with 98.5% of other shareholders voting against.
The trust’s chair, Tom Burnet, said Saba had since declined substantive meetings and, at the recent annual general meeting, voted without warning to remove all directors—without proposing replacements. That move, the board said, threatened to leave the company in breach of UK corporate law.
In response to shareholder feedback seeking a merger opportunity that did not disproportionately benefit Saba, the board said it negotiated the proposed combination with Edinburgh Worldwide.
The merged entity would have continued to be managed by Baillie Gifford & Co, investing in U.S. public and private companies. The board argued the deal would create economies of scale, cost efficiencies, and greater liquidity.
SABA’S ALLEGED OBSTRUCTION
Burnet expressed frustration with Saba’s latest move. “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,” he said.
“The Board remains determined in its commitment to act in the interests of shareholders as a whole.”
The trust said its investment strategy has seen NAV outperform the S&P 500 index over one and three years, though it acknowledged challenging five-year figures due to macroeconomic headwinds.
Saba Capital Management did not immediately respond to a Reuters request for comment.