DEFC14A: BlackRock Innovation and Growth Term Trust Faces Activist Challenge from Saba Capital

BlackRock Innovation and Growth Term Trust urges shareholders to vote against Saba Capital's nominees and proposal to terminate the investment management agreement with BlackRock Advisors, LLC.

Summary

• BlackRock Innovation and Growth Term Trust (BIGZ) is holding an annual meeting on June 25, 2024, where shareholders will vote on nominees for the Board of Trustees and a proposal from Saba Capital Management, L.P. to terminate the investment management agreement with BlackRock Advisors, LLC.
• The Board of Trustees unanimously opposes both Saba's nominees and proposal, believing they are not in the best interests of all shareholders.
• The Board recommends shareholders vote FOR the Board's nominees and AGAINST Saba's proposal using the WHITE proxy card.
• Saba has nominated seven individuals for election to the Board and is proposing to terminate the investment management agreement, which the Board believes may lead to Saba installing itself as the investment manager.
• The Board believes Saba is attempting to take control of the Board for its own benefit without regard to other shareholders.
• The Board highlights that the current Board members have experience overseeing investment companies and have implemented shareholder-friendly initiatives, such as share buybacks that have generated approximately $35 million in shareholder profits.
• The Board argues that terminating the investment management agreement would deprive the Trust of BlackRock's experience and expertise, plunge the Trust into uncertainty, and harm shareholders.
• The Board emphasizes that it reviews the Investment Management Agreement annually and is best positioned to evaluate BlackRock.
• The Trust's managed assets as of April 3, 2024, were $2,038,234,651, and there were 224,418,826 common shares outstanding.
• Georgeson LLC has been retained as the proxy solicitation firm and is expected to be paid approximately $394,700 for its services.

Sentiment

Score: 4

Explanation: The document has a negative sentiment due to the ongoing proxy fight and the Board's strong opposition to Saba's proposals. While the Board highlights some positive aspects of the Trust's performance, the overall tone is defensive and concerned about potential negative outcomes.

Positives

• The current Board members have experience overseeing investment companies.
• The Board has implemented shareholder-friendly initiatives, such as share buybacks that have generated approximately $35 million in shareholder profits.
• The Trust returned 19.2% on a market price basis in 2023.
• Shareholders currently receive monthly distributions at a rate of 6.6% on market price.

Negatives

• Saba Capital Management, L.P. is attempting to take control of the Board.
• Saba has nominated seven individuals for election to the Board and is proposing to terminate the investment management agreement.
• The Board believes Saba's actions are harmful to long-term shareholders of the Trust.
• Termination of the Investment Management Agreement would plunge the Trust into uncertainty about its investment adviser and its future, harming the Trust and its shareholders.

Risks

• The election of Saba's nominees and approval of their proposal could lead to Saba installing itself as the investment manager.
• Terminating the investment management agreement would deprive the Trust of BlackRock's experience and expertise.
• The uncertainty associated with the Trusts portfolio management could be catastrophic to the performance and share trading price of the Trust.
• If approval of the new investment management agreement were not obtained, the Trust would remain orphaned without an investment adviser to manage its assets.
• Termination of the Investment Management Agreement would require the Trust to cease using BlackRock in its name and could adversely impact the attractiveness of the Trust to prospective investors.

Future Outlook

The Board will continue to review the Investment Management Agreement annually and act in the best interests of the Trust and its shareholders.

Management Comments

• The Board believes that termination of the investment management agreement between the Trust and BlackRock Advisors, LLC is NOT in the best interests of the Trust and its shareholders.
• The Board believes Saba engages in these tactics to benefit itself and its own hedge funds and investors, and that Sabas actions are harmful to long-term shareholders of the Trust.

Industry Context

Activist hedge funds like Saba Capital Management often target closed-end funds to unlock value or influence management decisions. This situation reflects a common dynamic in the closed-end fund space where activists seek to address discounts to net asset value or perceived underperformance.

Comparison to Industry Standards

• Saba's strategy of acquiring significant holdings in closed-end funds to elect its own trustees and then appoint itself as investment adviser mirrors tactics used by other activist investors in the closed-end fund space.
• The document mentions that Saba has on two separate occasions acquired significant holdings in a closed-end fund to allow Saba to take over the fund, by using those holdings to help elect boards comprised of at least a majority of Saba-nominated trustees, who in turn terminated the funds existing management agreement and then appointed Saba as investment adviser to the fund.
• The document mentions that Saba has made radical changes to the investment strategies of those funds, resulting in them investing in higher-risk asset classes that may ultimately impede those funds ability to produce stable income for shareholders over the long term.

Stakeholder Impact

• Shareholders face uncertainty regarding the future management and investment strategy of the Trust.
• Employees of BlackRock Advisors, LLC could be affected if the investment management agreement is terminated.
• The Trust's performance and reputation could be impacted by the outcome of the proxy fight.

Next Steps

• Shareholders are urged to vote using the WHITE proxy card.
• The Board will continue to monitor the situation and take actions it deems necessary to protect the interests of shareholders.

Key Dates

Keywords

BlackRock, Saba Capital, proxy, investment management agreement, Board of Trustees, shareholders, closed-end fund, BIGZ, nominees, proposal