Exit Tender Offer: what IEM’s board is doing and why
Impax Environmental Markets (LSE: IEM) has published its 2025 annual results alongside a significant governance move: an Exit Tender Offer that would let all shareholders sell up to 100% of their shares for cash at close to net asset value. This follows the failed Continuation Tender Offer in January, which was conditional on the company’s largest shareholder, Saba Capital, tendering its holding. Saba declined, the conditions were not met, and the board has now opted for a cleaner, definitive route.
The chairman is blunt about the motivation. With Saba’s stake rising to 22.1% and the fund’s objectives not aligned with Saba, the board judged that “maintaining the status quo would expose shareholders to unacceptable risks,” including the possibility of Saba gaining control and materially changing IEM’s strategy. Directors will tender all of their own shares and recommend shareholders vote to enable the Exit Tender Offer to proceed.
The year in numbers: steady NAV, narrower discount, heavy buybacks
IEM’s NAV total return for 2025 was 0.9%, with NAV per share at 426.4p. The share price rose 4.3% to 396.5p as the discount to NAV narrowed to 7.0% from 9.8% a year earlier. The trust paid a total dividend of 5.1p per share, up 2.0%.
| Metric | 2025 | 2024 |
|---|---|---|
| NAV per share (debt at fair value) | 426.4p | 427.6p |
| NAV total return | 0.9% | -0.4% |
| Share price | 396.5p | 385.5p |
| Share price total return | 4.3% | -2.6% |
| Discount to NAV | 7.0% | 9.8% |
| Net assets | £812m | £1,026m |
| Total dividend | 5.1p | 5.0p |
| Shares bought back | 49.45m (20.6%) | 41.25m (14.7%) |
| Cash spent on buybacks | £189m | £161m |
| Ongoing charges | 0.91% | 0.84% |
| Borrowings | £87.0m | £83.1m |
| Net gearing | 10.0% | 7.6% |
Performance context: a specialist mandate in a mega-cap market
Relative performance disappoints on broad measures: the MSCI AC World index returned 13.9% in 2025, driven by mega-cap AI and Financials. Those areas sit largely outside IEM’s investable universe, which requires portfolio companies to generate at least 50% of revenues from environmental markets. By design, that can mean missing concentrated rallies elsewhere.
Under the bonnet, management reported stronger returns from electrification, data centre suppliers and independent power producers like geothermal specialist Ormat Technologies. Water utilities were also supportive. Laggards included US construction-exposed names and some consumer-linked holdings that faced downtrading.
Why the Exit Tender Offer matters for shareholders
A tender offer is a company’s invitation to buy back shares directly from investors. Pricing at or close to NAV is attractive when a trust trades at a discount. IEM’s board says the Exit Tender Offer “provides all shareholders with an exit from the Company at close to NAV,” subject to shareholder approval by simple majority.
What it means in practice:
- Liquidity at close to NAV – helpful if the market discount persists.
- Strategy certainty for those who exit – you sidestep the risk of a future mandate change.
- But a slimmer or different IEM for those who remain – the outcome will depend on take-up, and the board signals a review may follow.
The accounts flag a material uncertainty related to going concern because of the ownership dynamics and tender outcome. That is not a solvency alarm – the trust emphasises its ability to meet liabilities – but it does underline that the structure and size of IEM could change meaningfully after the tender.
Discount control: decisive action already taken
IEM has been active on the share buyback front, repurchasing 49.5 million shares in 2025 for £189 million. That was 20.6% of the starting share count and helped keep the discount’s average level to 9.7% across the year. The Exit Tender Offer is a step beyond routine buybacks – it is a one-off opportunity to transact close to NAV rather than at a market discount that can move around with sentiment.
Portfolio and process updates you should know
- New benchmark framework – IEM introduced the Solactive Global Environmental Markets Specialists Index to sit alongside MSCI ACWI. It is a thematic yardstick for the opportunity set, not a constraint.
- Team change – Sanjeev Lakhani joined as portfolio manager on 1 October 2025 alongside Fotis Chatzimichalakis.
- More focused portfolio – holdings moved from 60 towards 50, with the top ten rising to 29.6% of assets. At year end the trust held 54 companies; the largest position was 4.4% of net assets.
- Valuation and growth – forward PE of 21.2x with a 13.3% forward earnings growth rate, versus MSCI ACWI at 18.7x and 9.8% respectively.
- Gearing mix – £87.0 million of borrowings across €60 million of loan notes and a £35 million rolling multi-currency RCF with Bank of America, giving net gearing of 10.0%.
Jargon buster
- NAV – net asset value, or the per-share value of the underlying portfolio.
- Discount to NAV – when the share price trades below NAV. A 7.0% discount means shares cost 7% less than the portfolio value.
- Total return – performance including dividends reinvested.
- Tender offer – a company offer to buy shares directly from holders, usually at or near NAV for investment trusts.
- Gearing – borrowing to invest. It can amplify gains and losses.
- RCF – revolving credit facility, a flexible borrowing line.
My take: the trade-offs, plainly
- Positives:
- The Exit Tender Offer is a fair way to reconcile clashing objectives and offers a clean liquidity event at close to NAV.
- Discount discipline has been robust – buybacks plus a narrower year-end discount of 7.0%.
- Portfolio is more concentrated in higher-conviction names, and operational costs remain competitive at 0.91% ongoing charges.
- Negatives:
- Underperformance versus MSCI ACWI continues to weigh on sentiment, even if much of it is mandate-related.
- Structural uncertainty is real. Depending on tender take-up, IEM could shrink materially, which can add frictional costs and may require portfolio adjustments.
- Borrowings and covenants must be managed carefully through any shrinkage, though there were no breaches reported.
What to watch next
The key immediate step is the shareholder vote to enable the Exit Tender Offer. The board “unanimously recommends” voting in favour and directors will tender all of their shares. The AGM will be convened after the tender outcome is known. For investors, the choice is straightforward: take NAV-close liquidity now, or stay invested in a leaner, more focused environmental markets trust whose future scale and share register may look different.
Either way, 2025 shows the board is prepared to act decisively on the discount and on governance. If you believe in the long-term growth of environmental markets but want clarity on structure, the tender outcome will be the moment that sets the next chapter for IEM.
