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Armitage and Mills press for Strategic Equity Capital exit

Armitage and Mills press for Strategic Equity Capital exit

Ian Armitage (pictured) and Chris Mills, the fund managers backing the new venture of Stuart Widdowson, former manager of Strategic Equity Capital (SEC), have called for an extraordinary general meeting of the investment trust's shareholders.

Armitage and Mills hold just over 5% of SEC, which Widdowson ran for seven years with a strong performance record until he resigned from GVQ Investment Management last month.

Armitage, who will chair Widdowson's new business, and Mills, whose Harwood Capital will jointly own the as yet un-named company, want SEC to buy back its shares at a tight discount to net asset value. The discount - or gap between the underlying NAV and the share price - has doubled to nearly 15% since Widdowson's departure was announced in February.

‘The purpose of the notice of requisition of general meeting is to enable those shareholders, whose primary motive in investing in the trust was to support and benefit from the investment expertise of Stuart Widdowson, to realise their investment at a fair discount to the company’s net asset value (NAV),’ Harwood said in a statement.

Armitage, who gave Widdowson (pictured) his first fund management job when boss of venture capital firm HgCapital, holds 4.88% of SEC, and Mills 0.14% through a company called Growth Financial Services.

They want the trust, whose largest shareholder with a 14.75% stake is GVQ's owner RIT Capital Partners (RCP), the Rothschild banking dynasty fund, to use its annual authority to buy back 15% of its shares but to do so at a discount of no greater than 5%.

They point out that following the takeover of former holding E2V Technologies, SEC should have enough cash to launch the share buy-backs without being forced to sell assets in a way that would hurt shareholders.

Mills, manager of the North Atlantic Smaller Companies (NAS) and Oryx International Growth (OIG) investment trusts, has previously told the board the best solution would be to split SEC into two, offering shareholders a choice of manager. He says its chairman Richard Hills has refused to meet and discuss the proposal having decided to stick with GVQ and Widdowson's successor Jeff Harris.

Ewan Lovett -Turner, investment companies analyst at Numis Securities, said the EGM requisition implied that Armitage and Mills had given up on pressuring the SEC board to drop GVQ and switch to Widdowson's new firm.

The analyst said the board was unlikely to back their new proposal as its focused portfolio of just 17 small stocks under £300 million made it unsuitable for a fixed discount control policy. It could also deter new investors if it shrunk much below its current £140 million market value, he said.

'We can understand why Ian Armitage would be seeking an exit at a tighter discount, which has widened from 8% to 14.6% since the announcement of Stuart Widdowson’s departure. However, this is not out of line with the current weighted average discount for the UK Smaller Companies sector of 13.9%,' Lovett -Turner added.

Numis said SEC could buy back up to 10.47 million shares using its existing powers. It has re-purchased 50,000 since the authority was renewed at its annual general meeting in November.

SEC shares gained just over 5p, or 2.6%, to 206.3p.


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