BlackRock and Saba Capital Management, led by Boaz Weinstein, have reached a settlement in their ongoing dispute concerning closed-end funds. This agreement marks a significant development in the financial sector, highlighting the complexities of fund management and shareholder activism.
Background of the Dispute
Saba Capital Management, a hedge fund specializing in credit and equity strategies, had been engaged in an activist campaign against BlackRock’s closed-end funds. The contention centered on the persistent discounts between the funds’ net asset values (NAV) and their market prices, which Saba argued were detrimental to shareholders. In response, Saba sought to replace board members of certain BlackRock funds to address these valuation discrepancies.
Terms of the Settlement
As part of the settlement, BlackRock’s Innovation and Growth Term Trust and Health Sciences Term Trust will conduct tender offers to repurchase 50% and 40% of their outstanding shares, respectively, at 99.5% of their NAV. This move aims to reduce the discount between the funds’ market prices and their underlying asset values. Additionally, Saba has agreed to withdraw its proposals and adhere to standstill covenants for three years, ceasing its activist efforts during this period.
Implications for the Closed-End Fund Industry
This settlement underscores the influence of shareholder activism in the closed-end fund sector. By addressing the discounts to NAV, the agreement seeks to enhance shareholder value and may set a precedent for similar actions in the industry. Boaz Weinstein remarked, “Our settlement with BlackRock shows that there is a path to a win-win outcome for managers and shareholders.”
The resolution between BlackRock and Saba Capital Management highlights the dynamic interplay between fund managers and activist investors. By reaching a mutually beneficial agreement, both parties demonstrate a commitment to aligning the interests of management and shareholders, potentially paving the way for improved governance practices within the closed-end fund industry.
