Saba tells Workspace to proceed with managed wind-down

(Alliance News) - Workspace Group PLC should conduct a strategic sale of its assets, Saba Capital Management Ltd claimed in an open letter sent last week and published on Tuesday.

The activist investor announced that it had sent the letter on Thursday. In the letter, Saba "urged" the London-based flexible workspace provider's board "to recommend the company proceed with a managed wind-down, which should include an orderly strategic sale of its assets, systematic repayment of debt and the timely return of capital to shareholders."

Saba, which holds an approximate 13.5% stake in Workspace as of Tuesday, said that its current -45% discount to net asset value "is among the largest of the 19 UK REITs in our database, which have discounts ranging from -7% to -45%", and that a valuation increase has not been realised despite Workspace's "stable operating platform and capable management team".

This, Saba said, signals "a lack of confidence from the market that [Workspace] can deliver equity value through long-term reinvestment or expansion".

It said Workspace assets would have a higher value, more in line with its NAV, if the firm were offered to a larger buyer or buyers "with the resources available to maximise their cash flows, reduce operating costs and finance them at a lower cost."

Saba also highlighted Workspace's "highly concentrated shareholder register"; a "challenging" climate in which "debt markets have become more selective, refinancing terms are more expensive, and leverage is far less accretive to equity than in prior cycles"; and continued "robust" demand for "high-quality income-producing assets".

The investor then put forward a three-phase plan for a wind-down and sale, with a timeframe of 12 months. This included selling the easiest-to-market assets and using proceeds to reduce leverage in phase 1, followed by eliminating all debt and by capital returns through special dividends and buybacks in phase 2, with any remaining assets being disposed of in phase 3.

Saba said it requests that the Workspace board adopt its proposal no later than February 20, after which it "will consider all options available to us".

"Considering the company's persistent trading discount, refinancing challenges, and structural impediments in its shareholder base, the current model no longer represents the best path to value creation," Saba stated. "A managed wind-down would allow for a disciplined, phased realisation of the value embedded in the company's assets."

Workspace shares had closed down 1.7% at 403.00 pence on Tuesday in London.

By Emma Curzon, Alliance News reporter

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