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Electra hits back at Sherborne's ‘exuberant’ claims

Electra Private Equity and Sherborne Investors are locked in a war of words ahead of an extraordinary general meeting on 6 October.

 
Electra hits back at Sherborne's ‘exuberant’ claims

Electra Private Equity (ELTA ) has demanded that Sherborne Investors, a 20% shareholder, spell out how it would generate the £1 billion of additional value for investors it claimed last week.

Electra's chairman Roger Yates and Sherborne's Edward Bramson are locked in a war of words ahead of an extraordinary general meeting on 6 October. The egm was called by Sherborne which wants to appoint two representatives to the board and oversee a strategic review aimed at improving what it says is ELTA's deteriorating performance.

In a riposte to the shareholder letter sent by Sherborne last week, Yates rebutted and questioned all the points made by the activist investor. ‘Sherborne’s letter claims its strategic review will create over £1 billion of value but provides no further detail on how this might be achieved,' adding the board believed it made a series of 'unverifiable statements and unsubstantiated claims'.

‘Furthermore, the board of directors believes that Sherborne’s letter merely serves to highlight a lack of understanding of the Electra business and its fundamental investment proposition and why Sherborne’s nominees, Mr Bramson and Mr Brindle, should not be elected.

It added: ‘Sherborne’s claims appear to be based upon analysis of a “representative” sample of Electra’s portfolio companies; in reality, they are based on public information covering less than 30% of the current investment portfolio’.

Electra also questioned Sherborne’s track record. Sherborne has provided details of five key UK investments over the last 10 years prior to its investment in Electra. One of these investments was a passive investment in 3i Group plc where Sherborne did not obtain board representation. Another was in F&C Asset Management which underperformed its peers during the time of Sherborne’s involvement,’ Electra pointed out.

‘The remaining three investments, totalling just c£80 million, were in operating companies that required a turnaround. Electra is not an operating company, nor does it invest only or predominantly in turnaround companies.’

Electra also highlighted what it called its ‘superior and sustainable’ track record. It pointed out its target was to deliver a 10%-15% annualised return on equity and that it had delivered on this with a 14% annualised return on equity in the 10 years to 31 March 2014.

‘We are surprised that Sherborne’s letter demonstrates considerable misunderstanding of how Electra works. Exuberant and unsubstantiated claims are no substitute for Electra’s consistently superior track record,’ Yates said.

‘Against any sensible industry benchmark, Electra has delivered exceptional performance over the long-term. Your board aims to continue this record without the destabilising efforts of Mr Bramson. The board of directors of Electra strongly urges all shareholders to vote against the resolutions,’ said Yates. 

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