Saba Investment Trust: One Share Away from Herald Acquisition Bid

Saba Capital Management is just one share away from triggering a mandatory bid for Herald Investment Trust after acquiring a 5% stake. The move is a result of the trust's takeover defence rules, which require a bidder to make a general offer if they reach 30% ownership.

Saba Capital Management, L.P. is just one share away from triggering a mandatory bid for Herald Investment Trust (HRI) after acquiring a 5% stake. This move is a result of the trust's takeover defense rules, which require a bidder to make a general offer if they reach 30% ownership. The latest developments underscore the ongoing tension between Saba and Herald Investment Management, led by long-serving fund manager Katie Potts.

The recent increase in Saba's voting rights in Herald, reported to exceed 30%, was primarily due to the trust's share buyback program initiated after passing its triennial continuation vote in March [1]. Saba's holdings of physical shares in Herald have fallen from 27.8% to 24%, while its indirect holdings via swap derivatives have risen from 1.3% to 5.9% [1]. This shift in ownership structure has brought Saba's total voting rights over the 30% threshold, necessitating a mandatory bid under UK Takeover Panel regulations.

The current situation marks a significant escalation in Saba's campaign against Herald. In January, Saba's attempt to replace the trust's board and take control of the company was overwhelmingly rejected by shareholders [1]. Despite this setback, Saba has maintained its position and now finds itself on the brink of a mandatory bid.

Herald's shares have seen a turbulent year, shedding their longstanding discount in January and reverting to a 10% discount since Saba's defeat at the general meeting [1]. The trust's shares have also been affected by broader market turmoil, including the impact of US President Trump's tariffs and subsequent reprieves [1].

Long-term performance under Potts has been strong, with Herald's assets growing 27 times since flotation and a six-fold increase in shareholders' stakes since the end of the global financial crisis in 2009 [1]. The trust's 10-year total return of 216.8% outperforms the 125% average of trusts in the Global Smaller Companies sector [1].

Saba Capital Management, founded in 2009, manages $3.3 billion across various strategies, including Credit Relative Value, Tail Hedge, SPACs, and Closed-End Funds [2]. The hedge fund's recent agreements with Eaton Vance Management to commence tender offers on three of its funds highlight its active approach to shareholder engagement and liquidity provision [2].

As Saba approaches the 30% threshold, the financial community awaits the next steps in this ongoing saga. The potential mandatory bid could significantly impact Herald's shareholder base and the broader investment trust sector.

References:
[1] https://quoteddata.com/2025/07/herald-share-buybacks-push-its-nemesis-saba-over-30/
[2] https://www.businesswire.com/news/home/20210512005965/en/Saba-Capital-Reaches-Agreements-With-Three-Eaton-Vance-Closed-End-Funds