A proposed merger of two Scottish investment trusts has been rejected by the activist hedge fund which has been campaigning to oust a number of boards.

It has emerged today that “active discussions” have been held between Baillie Gifford US Growth Trust (USGT) and Edinburgh Worldwide Investment Trust (EWIT).

USGT says this would be a “transformational merger opportunity that would result in both a continuation and refinement of the current investment strategy as well as a material cash exit opportunity for all shareholders.”

At a meeting yesterday, Saba Capital Management, a 29% shareholder, said it would not support the deal.

In a statement today, it said: “By pushing for a merger that benefits Baillie Gifford rather than shareholders, EWI’s board has confirmed where its loyalties truly lie. Shareholders deserve a board that puts them first – not another cosy deal that entrenches an unaccountable manager.”

The New York-based fund, led by Boaz Weinstein, has already called for a general meeting of EWIT as he revives his call for the board to be replaced.

The directors of USGT said they firmly believe that the merger would be in the interests of all shareholders, including Saba.

“However, due to the size of its holding, Saba is able to block the requisite shareholder approvals. Notwithstanding Saba’s lack of support for the merger, the board would like to consult with shareholders more broadly on their views.”

On 18 December last year, the company was requisitioned by Saba to replace its independent board with Saba’s own nominees and gain control of the company with the intention of managing the company themselves with a new investment strategy.

This requisition was resoundingly defeated at the requisitioned general meeting held on 3 February with 98.5% of non-Saba shareholders voting against the resolutions.

Shortly after the meeting, the chair and senior independent director of the company met with Saba whih proposed a further meeting later in the year.

Saba was offered meetings with the chair and the senior independent director following the publication of the annual results in August and again following the AGM in September, but declined without providing any substantive feedback apart from indicating that it would only be interested in a meeting to discuss any proposals that the doard may wish to put forward.

Furthermore, at the company’s recent AGM, without prior notice of its intention, Saba voted its shares once again to remove all the company’s directors, this time not proposing any nominees of its own and therefore threatening the company with the unprecedented prospect of being in breach of the Companies Act, the UK Listing Rules and its own Articles by leaving the Company with no directors.

“Such a situation would, of course, have had significant negative consequences for all shareholders,” said USGT.

It added that since that meeting, the board has “worked tirelessly to create a way forward that would be equitable and positive for all shareholders, and has sought extensive feedback from shareholders to understand their opinions.”

The board said it has “negotiated and advanced a credible proposal” to combine with Edinburgh Worldwide Investment Trust.

Both companies have a similar investment philosophy. In addition, there is a high commonality of EWIT’s portfolio with that of the company: as at 30 November 2025, EWIT’s assets had c.75% North American geographical exposure, were c.22% invested in private companies and included 8 investments in common with the Company, accounting for c.31% of EWIT’s assets.

Outline of proposal to combine with EWIT

The terms of the proposed merger, which would be undertaken through a scheme of reconstruction of EWIT and have been substantively agreed between the two boards.

They would continue to invest predominantly in listed and private US companies across the market capitalisation spectrum, reflecting the complementarity of both companies’ investment strategies.

They would also continue to be managed by Baillie Gifford.

Shareholders have been told that the deal would benefit from greater economies of scale that are expected to result from the enlarged asset base, including cost efficiencies and greater liquidity.

Both companies are offering a cash exit for up to 40% of issued share capital at a narrow discount to NAV (the level of the discount being set having taken into account the illiquid nature of the companies’ private company investments).

It is intended to form a “robust and efficient” blended board with six directors on completion of the merger.

Tom Burnet, chair of Baillie Gifford US Growth Trust, said: “We are highly disappointed that Saba has chosen once again to impede other shareholders by blocking the Board from credibly presenting a potential merger opportunity that would result in a materially improved position for shareholders of both companies.

“This potential merger opportunity includes the offer of substantial liquidity for those shareholders who wish it.

“I and my fellow Directors have always been very clear: we want to protect and create value for all our shareholders. That is our priority.

“We want to be able to put proposals for a way forward which are fair and equitable to all our shareholders. The board remains determined in its commitment to act in the interests of shareholders as a whole.”