DEFA14A: BlackRock Defends BCAT Against Saba's Proposal to Terminate Investment Management Agreement

BlackRock urges shareholders to vote against Saba Capital's proposal to terminate the investment management agreement for BlackRock Capital Allocation Term Trust (BCAT), highlighting BCAT's outperformance and value creation.

Summary

• BlackRock is urging shareholders of BlackRock Capital Allocation Term Trust (BCAT) to vote using the WHITE proxy card to support BlackRock's nominees and oppose Saba Capital Management's proposal to terminate the investment management agreement.
• BlackRock highlights BCAT's strong performance, including outperforming peers in 2023 with a total shareholder return of 19.27% compared to the peer median of 6.53%.
• BCAT's sustainable distributions have grown, while peers have decreased.
• The discount to NAV has narrowed significantly from 17.7% on 12/31/2022 to 4.6% on 5/24/2024.
• BlackRock has repurchased $78 million in shares, resulting in $13.3 million in NAV accretion for shareholders.
• BlackRock argues that Saba's actions are driven by short-term profit motives at the expense of long-term shareholder value.
• BlackRock claims its CEFs have delivered consistent long-term value, generating $3.6 billion in gains in 2023 and paying $3.1 billion in annual dividends.
• BlackRock has repurchased $1.3 billion in shares, generating over $200 million in gains.
• BlackRock criticizes Saba's track record in managing CEFs, citing underperformance and riskier strategies at funds Saba has taken over, such as BRW.

Sentiment

Score: 7

Explanation: The document presents a positive view of BlackRock's management of BCAT, highlighting strong performance and value creation. However, the need to defend against an activist investor introduces an element of uncertainty and potential disruption.

Positives

• BCAT outperformed its peers in 2023, with a total shareholder return of 19.27% compared to a peer median of 6.53%.
• BCAT's discount to NAV has narrowed significantly, from 17.7% to 4.6% between 12/31/2022 and 5/24/2024.
• BlackRock's share repurchase program has added value, with $78 million in shares repurchased and $13.3 million in NAV accretion.
• BlackRock CEFs have a strong track record, generating $3.6 billion in gains in 2023 and paying $3.1 billion in annual dividends.
• BlackRock has repurchased $1.3 billion in shares across its CEFs, resulting in over $200 million in gains.

Negatives

• Saba Capital Management is attempting to terminate the investment management agreement between BCAT and BlackRock Advisors, LLC.
• Saba's actions are portrayed as being motivated by short-term profit at the expense of long-term shareholder value.
• Saba's track record in managing CEFs is criticized, with examples of underperformance and riskier strategies at funds Saba has taken over.

Risks

• The potential termination of the investment management agreement could disrupt BCAT's current strategy and performance.
• Saba's influence could lead to changes in BCAT's investment approach, potentially increasing risk.
• Shareholder uncertainty surrounding the proxy fight could impact BCAT's market price and NAV.

Future Outlook

The document focuses on the current proxy fight and does not provide specific forward-looking statements beyond the implications of the vote outcome.

Management Comments

• BlackRock is fighting for you.
• Defend your fund, save your income.
• BlackRock is delivering real value.
• Actions taken by your Board and management team have narrowed BCATs discount to NAV.
• BlackRocks open market share repurchase program enhances the value of your investment.
• This is no time for taking chances.
• We need all shareholders to vote on the enclosed WHITE proxy card today to preserve YOUR Fund.

Industry Context

This announcement reflects the ongoing trend of activist investors, like Saba Capital, targeting closed-end funds to unlock value or force changes in management and strategy. The document highlights the tension between short-term activist goals and the long-term investment strategies of established asset managers like BlackRock.

Comparison to Industry Standards

• The document compares BCAT's performance to a peer set including ECAT, GLV, GLO, BXSY, FT, RCG, RIV, OPP and SPE, and PDX (starting 1/1/2024).
• BCAT's 2023 total shareholder return of 19.27% significantly outperformed the peer median of 6.53%.
• The document also compares BRW's performance since Saba's takeover to BlackRock's bank loan funds median, suggesting underperformance under Saba's management.

Stakeholder Impact

• Shareholders are directly impacted by the outcome of the proxy vote, which will influence the management and investment strategy of BCAT.
• Employees of BlackRock Advisors, LLC could be affected if the investment management agreement is terminated.
• The fund's performance impacts its ability to provide distributions to shareholders.

Next Steps

• Shareholders are urged to vote on the WHITE proxy card to elect BlackRock's nominees and oppose Saba's proposal.
• The outcome of the vote will determine the future management and strategy of BCAT.

Key Dates

Keywords

BlackRock, BCAT, Saba Capital, Proxy Fight, Investment Management Agreement, Closed-End Fund, Shareholder Value, NAV, Share Repurchase, Distributions