Activist hedge fund Saba Capital has increased its stake in Workspace Group, a UK office landlord, to 29.1%—just shy of the 30% threshold that would force a mandatory takeover bid under UK takeover rules. The move signals an escalating battle between the fund and Workspace's board.
How Saba Built Its Stake
Saba Capital, known for its activist investing style, has been steadily accumulating shares in Workspace Group. The fund's latest filing shows it has nudged up from 28.2%, capping a steady build that has more than doubled from 13.5% in January. This makes Saba the company's largest shareholder.
The 30% threshold is a key line under UK takeover regulations. Once crossed, an investor must make a mandatory cash offer to all remaining shareholders at the highest price paid in the previous 12 months. By staying just under that level, Saba avoids triggering that requirement while maintaining significant influence.
The Boardroom Battle
Saba's stake increase comes amid an open conflict with Workspace's board. In June, the fund sought to replace non-executive directors, arguing that the company's shares trade at roughly a 50% discount to net asset value (NAV). NAV is the difference between what a company's assets—in this case, office properties—are worth on paper and its liabilities. A large discount suggests investors believe the assets are overvalued or poorly managed.
Workspace Group owns and manages a portfolio of flexible office spaces across London, catering to small and medium-sized businesses. The company has faced challenges as demand for traditional office space has shifted post-pandemic, with many firms adopting hybrid work models. This has put pressure on occupancy rates and rental income, contributing to the discount Saba is targeting.
Saba has pushed for strategic changes, potentially including asset sales, share buybacks, or a full sale of the company. The fund's approach is similar to other activist campaigns where investors accumulate stakes to force management into actions that unlock shareholder value.
What This Means for Investors
For everyday investors, the situation highlights the dynamics of activist investing and UK takeover rules. Saba's stake just below 30% keeps the pressure on Workspace's board without triggering a mandatory bid. If Saba were to cross that line, it would have to make an offer to all shareholders, which could lead to a premium on the share price.
However, investors should be cautious. Activist campaigns can be unpredictable, and outcomes depend on negotiations, shareholder votes, and market conditions. Workspace's board may resist Saba's demands, leading to a prolonged proxy fight. Alternatively, Saba could eventually launch a full takeover bid, which would require financing and regulatory approval.
The broader context is also important. The UK office market has been under pressure from changing work patterns, rising interest rates, and economic uncertainty. Companies like Workspace that focus on flexible office space may benefit from demand for shorter-term leases, but they also face competition from larger landlords and co-working operators.
Investors should watch for further filings from Saba, as well as any response from Workspace's board. If Saba continues to increase its stake, a mandatory bid could become inevitable. If it stays at current levels, the focus will shift to the board's ability to address the NAV discount and improve shareholder returns.
Similar activist situations have played out in other markets. For example, DCC's board faced shareholder pushback during its takeover talks with KKR, while Delivery Hero's advanced talks with Uber show how activist pressure can lead to deal-making. In the US, Lucid denied takeover rumors after a sharp share price drop, illustrating how market speculation can affect stock movements.
What to Watch Next
Key developments to monitor include any further stake increases by Saba, which could trigger a mandatory bid. Also important are Workspace's next earnings report and any strategic announcements from the board. If Saba's campaign gains support from other shareholders, it could force a special meeting or board changes.
For now, Saba's position just under 30% gives it leverage without the full responsibility of a takeover. The fund is betting that it can push Workspace to narrow the NAV discount, potentially boosting the share price. Whether that bet pays off depends on the board's response and the broader office market outlook.
