DEFA14A: BlackRock Science and Technology Term Trust Faces Takeover Attempt by Saba Capital

BlackRock is urging shareholders of the BlackRock Science and Technology Term Trust (BSTZ) to vote against a proposal by Saba Capital to replace the board and terminate the investment management agreement.

Summary

• BlackRock is actively defending the BlackRock Science and Technology Term Trust (BSTZ) against a takeover attempt by the hedge fund Saba Capital.
• Saba is seeking to install its own board nominees and terminate BlackRock's investment management agreement.
• BlackRock argues that Saba's actions are motivated by short-term profit and could harm long-term shareholder value.
• BlackRock highlights BSTZ's strong performance, including a 29.4% total shareholder return from January 2023 to year-to-date 2024, outperforming its benchmark's 22.1%.
• BSTZ has significantly narrowed its discount to NAV from 19.9% on 12/31/2022 to 11.1% on 5/31/2024.
• BlackRock has implemented a share buyback program, repurchasing $42 million in shares, plus an additional $9 million, to mitigate discounts and increase shareholder value.
• The fund intends to offer to repurchase 2.5% of its outstanding common shares at a price equal to 98% of NAV following the end of each quarter if the fund's common shares trade at a discount of more than 7.5% during each of the quarters ended 6/30/24, 9/30/24, 12/31/24 and 3/31/25.
• Glass Lewis and ISS recommend voting FOR BlackRock's nominees and AGAINST Saba's proposal.
• Shareholders are urged to vote using the WHITE proxy card and disregard any gold cards from Saba.

Sentiment

Score: 7

Explanation: The document conveys a sense of urgency and determination to defend against the takeover attempt. While highlighting positive performance metrics, it also acknowledges the risks associated with the proxy fight. The overall sentiment is cautiously optimistic, emphasizing the importance of shareholder support.

Positives

• BSTZ has delivered strong total shareholder returns, outperforming its benchmark.
• The fund has significantly reduced its discount to NAV.
• BlackRock has actively managed the discount through share buybacks.
• Independent proxy advisory firms Glass Lewis and ISS support BlackRock's position.
• The fund intends to offer to repurchase 2.5% of its outstanding common shares at a price equal to 98% of NAV following the end of each quarter if the fund's common shares trade at a discount of more than 7.5% during each of the quarters ended 6/30/24, 9/30/24, 12/31/24 and 3/31/25.

Negatives

• The fund is facing a proxy fight, which can create uncertainty and consume management's time and resources.
• Saba Capital believes that they can improve the fund's performance and shareholder value, suggesting potential dissatisfaction with the current management.
• The fund's discount to NAV, while narrowed, still exists.

Risks

• Saba Capital's takeover attempt could be successful, leading to changes in the fund's management and investment strategy.
• The proxy fight could negatively impact investor sentiment and the fund's share price.
• If the fund fails to maintain its performance or narrow the discount to NAV, shareholders may become more receptive to Saba's proposals.

Future Outlook

BlackRock intends to offer to repurchase 2.5% of its outstanding common shares at a price equal to 98% of NAV following the end of each quarter if the fund's common shares trade at a discount of more than 7.5% during each of the quarters ended 6/30/24, 9/30/24, 12/31/24 and 3/31/25.

Management Comments

• Stephen Minar, Managing Director, Closed-End Funds: 'BlackRock is fighting to protect your fund, but we need your support.'
• Stephen Minar, Managing Director, Closed-End Funds: 'A self-interested hedge fund is attempting to install their own hand-picked Board nominees to BSTZs Board. Their goal? A quick profit at the expense of your long-term investment.'
• Stephen Minar, Managing Director, Closed-End Funds: 'This is not Sabas first takeover attempt, and where they have taken control, shareholders have paid the price with underperformance, deeper discounts, and higher fees.'
• Stephen Minar, Managing Director, Closed-End Funds: 'Vote todayonly with your vote can we save your investment and financial future.'

Industry Context

Activist investors like Saba Capital frequently target closed-end funds trading at a discount to NAV, seeking to unlock value through various strategies, including board replacements, fund liquidations, or changes in investment policy. This proxy fight reflects a broader trend of increased shareholder activism in the closed-end fund space.

Comparison to Industry Standards

• The document cites Morningstar data to compare BSTZ's performance against a custom benchmark, the MSCI ACWI SMID Growth IT Call Overwrite Index (ex-BSTZ).
• The document does not provide specific comparisons to other closed-end funds with similar investment strategies, making it difficult to assess BSTZ's performance relative to its direct peers.
• Without a detailed peer group analysis, it's challenging to determine whether BSTZ's discount to NAV and shareholder returns are above or below industry averages.

Stakeholder Impact

• Shareholders are directly impacted by the outcome of the vote, as it will determine the fund's management and investment strategy.
• BlackRock's reputation and future management of closed-end funds are at stake.
• The proxy fight could influence the fund's share price and dividend yield.

Next Steps

• Shareholders need to vote on the proposals by following the instructions provided in the proxy materials.
• BlackRock will continue to engage with shareholders to advocate for its position.
• The outcome of the vote will determine the future direction of the fund.

Key Dates

Keywords

BlackRock, BSTZ, Saba Capital, proxy fight, takeover, shareholder value, discount to NAV, investment management agreement, board nominees, closed-end fund