Aberdeen Investments is to become the investment manager of the Herald Investment Trust (HRI), following a deal with activist investor Saba Capital.
The deal will bring to an end a standoff between HRI and Saba and is part of a larger agreement between the investment manager and Saba which includes optional standstill arrangements with a further eight investment trusts in Aberdeen’s range.
Under the three-year standstill agreement, Saba commits not to exercise any voting rights on any resolutions proposed at any annual or other general meeting of HRI against the recommendation of the board of HRI.
The deal, expected to complete in the third quarter, will also bring Herald Investment Management’s fund under Aberdeen’s management including the £1.6bn Herald Worldwide Technology Funds.
The proposed tender offer, for up to 66% of HRI’s issued share capital, will allow Saba and other HRI shareholder to exit at close to net asset value or remain invested in the trust.
Saba has agreed to tender its full holding.
Activist pressure on investment trusts has grown in recent years, with tensions growing between many boards and shareholders. This deal could be significant for the sector as combining a management deal with a standstill agreement could offer a potential model for resolving such tension between boards and activist shareholders.
Christian Pittard, head of closed end funds and managing director of corporate finance at Aberdeen said that the collaboration with Saba has shown how activist shareholders and investment trust boards can work together to end an impasse.
He said: “Saba's collaboration and determination to find a path forward that benefited all shareholders ultimately made it possible to preserve this trust and, together, deliver an outcome that is positive for everyone.
“The agreement regarding our wider active UK trust range provides a pragmatic and constructive way forward and supports the stability of the trusts who sign up to the standstill."
Eight staff, including lead manager Katie Potts, are expected to join Aberdeen’s London office.
Jason Windsor, CEO of Aberdeen, said: "The Herald team has a long track record of backing early-stage technology companies, and driving material long term growth from those investments.
“As the fifth largest manager of closed-end funds globally, and as a leading small cap manager, we are delighted to welcome Katie Potts and her team to Aberdeen. Completion of this transaction will further grow our franchise and demonstrates our innovation and commitment to the sector."