Key Takeaways
- • Saba Capital has increased its stake in BlackRock Smaller Companies Trust to 11.6% following the announced merger between BlackRock Smaller Companies and BlackRock Throgmorton, creating a £780 million consolidated vehicle.
- • The merged entity will become the largest growth-focused UK smaller companies investment trust in the Association of Investment Companies (AIC) sector, with combined net assets of approximately £780 million.
- • Saba, holding 17.8% of BlackRock Throgmorton and 10.4% of BlackRock Smaller Companies pre-merger, has committed to vote in favor of the combination and supported the strategic rationale of consolidation.
- • Shareholders are offered partial cash exit opportunities: 38% of Blackrock Throgmorton's issued share capital and 28% of BlackRock Smaller Companies' shares, both priced at 1% discounts to net asset value.
- • The merged trust will benefit from enhanced scale, improved liquidity, reduced costs, and portfolio continuity under co-management by Dan Whitestone (formerly Throgmorton) and Roland Arnold (BlackRock Smaller Companies), with 75% portfolio overlap facilitating integration.
Summary
Saba Capital has increased its ownership stake in BlackRock Smaller Companies Trust as part of a significant consolidation in the UK smaller companies investment trust sector. The activist investor, which held 10.4% of BlackRock Smaller Companies prior to the announced merger, now holds an 11.6% stake following the combination agreement with BlackRock Throgmorton Trust. The merged entity will create a £780 million investment vehicle positioned as the largest growth-focused trust within the AIC's UK smaller companies sector.
The merger agreement was reached following comprehensive strategic review by the boards of both trusts. BlackRock Throgmorton's board, chaired by James Will, engaged Stanhope Consulting to evaluate sector alternatives and concluded that a combination with its £495 million stable mate offered the optimal path to shareholder value creation. The consolidated trust will emerge with substantially greater scale and efficiency compared to the standalone £550 million BlackRock Smaller Companies operation. Saba's backing proved instrumental to the transaction approval, with the activist holding 17.8% of Throgmorton and committing to vote in favor of the merger.
The transaction structure provides shareholders with flexibility through partial cash exit options. Throgmorton shareholders can exit up to 38% of their shareholdings at net asset value plus a 1% discount, while BlackRock Smaller Companies shareholders have the opportunity to exit up to 28% on equivalent terms. Continuing shareholders will roll their remaining holdings into the enlarged entity. The high degree of portfolio overlap—approximately 75%—between the two trusts substantially reduces integration complexity and positions the combined fund for operational efficiency gains.
Portfolio management of the merged trust will be overseen jointly by Dan Whitestone, currently managing Throgmorton, and Roland Arnold, the existing BlackRock Smaller Companies manager. This co-management structure preserves the investment philosophy and process that has demonstrated consistent long-term performance in the UK smaller companies sector. The enlarged trust is positioned to deliver improved liquidity, reduced management costs through economies of scale, and enhanced research coverage of what the boards characterize as an underexplored segment of the domestic equity market—established mid-market businesses trading at valuations discounted relative to global comparators.
Separately, Saba Capital has also been active in its BlackRock ESG Capital Allocation Term Trust (ECAT) position, selling approximately 303,392 shares worth $4.2 million during April 1-2, 2026, at prices near the trust's 52-week low of $13.35. Following these transactions, Saba maintained a position of approximately 21.7 million shares in ECAT, which currently offers a dividend yield of 23.68%.
The merger agreement was reached following comprehensive strategic review by the boards of both trusts. BlackRock Throgmorton's board, chaired by James Will, engaged Stanhope Consulting to evaluate sector alternatives and concluded that a combination with its £495 million stable mate offered the optimal path to shareholder value creation. The consolidated trust will emerge with substantially greater scale and efficiency compared to the standalone £550 million BlackRock Smaller Companies operation. Saba's backing proved instrumental to the transaction approval, with the activist holding 17.8% of Throgmorton and committing to vote in favor of the merger.
The transaction structure provides shareholders with flexibility through partial cash exit options. Throgmorton shareholders can exit up to 38% of their shareholdings at net asset value plus a 1% discount, while BlackRock Smaller Companies shareholders have the opportunity to exit up to 28% on equivalent terms. Continuing shareholders will roll their remaining holdings into the enlarged entity. The high degree of portfolio overlap—approximately 75%—between the two trusts substantially reduces integration complexity and positions the combined fund for operational efficiency gains.
Portfolio management of the merged trust will be overseen jointly by Dan Whitestone, currently managing Throgmorton, and Roland Arnold, the existing BlackRock Smaller Companies manager. This co-management structure preserves the investment philosophy and process that has demonstrated consistent long-term performance in the UK smaller companies sector. The enlarged trust is positioned to deliver improved liquidity, reduced management costs through economies of scale, and enhanced research coverage of what the boards characterize as an underexplored segment of the domestic equity market—established mid-market businesses trading at valuations discounted relative to global comparators.
Separately, Saba Capital has also been active in its BlackRock ESG Capital Allocation Term Trust (ECAT) position, selling approximately 303,392 shares worth $4.2 million during April 1-2, 2026, at prices near the trust's 52-week low of $13.35. Following these transactions, Saba maintained a position of approximately 21.7 million shares in ECAT, which currently offers a dividend yield of 23.68%.
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