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Sherborne claims Electra threatened 'retribution' against rebels

Sherborne Investors has accused Electra Private Equity of a ‘confrontational’ approach to its attempt to place two directors on the board.

 
Sherborne claims Electra threatened 'retribution' against rebels

Updated with Electra response: Ed Bramson's Sherborne Investors has accused Electra Private Equity (ELTA ) of taking a ‘confrontational’ approach against its bid to gain two seats on the investment trust's board.

In an open letter to investors, Sherborne, Electra’s largest shareholder with a 30% stake, claimed the board had threatened 'retribution' against shareholders who supported the activist investor.

It also said that the board had attempted to block regulatory approvals for Bramson and Ian Brindle, which Sherborne is attempting for the second time get elected as non-executive directors at a meeting on 5 November. ‘Had these approvals been denied, we could have been compelled to divest our Electra shares at a loss,’ the activist investor wrote.

The letter offers the most concrete explanation for Bramson's two-year campaign to win board representation, which many investors have said has failed so far to spell out how it intends to improve the performance of one of the UK's best known listed private equity funds.

Although he failed to win shareholder backing last October analysts say Bramson (pictured) is in a stronger position now that Sherborne has increased its stake. 

Sherborne added that independent management of the fund had become ‘deficient’ and that the board had effectively ‘conceded that it is not fully independent’ of the asset management company.

‘The hostile reactions of the investment manager and the board seem disproportionate to a proposal by a long-term shareholder to nominate a small minority of qualified directors to Electra's board,’ said Sherborne boss Edward Bramson (pictured).

It argued that adding two directors to a board of six would not come close to obtaining 'control' of the £1.2 billion trust. 

‘Independence from management and constructive engagement are core principles of effective corporate governance and the board is wrong to suggest that reasonable questioning equates to disruptiveness.

‘Our requisition [of an extraordinary general meeting] is a last resort, having acted in accordance with the UK Stewardship Code and after exhausting all other avenues available. We continue to hope that the directors will reconsider their unwarranted opposition.’

Brindle was former UK chairman of auditors PricewaterhouseCoopers and deputy chairman of the Financial Reporting Review Panel. He served as a non-executive director of F&C Asset Management when Bramson took charge of the fund manager through Sherborne a few years ago. Sherborne said Brindle had never been paid by Sherborne and would not be in relation to Electra.

Sherborne is backed by leading fund management groups, including Columbia Threadneedle, Aviva Investors, Fidelity Worldwide, Insight Investment, Ruffer, Jupiter, Invesco and Woodford Investment Management.

Electra chairman Roger Yates said in response to Sherborne's letter that the activist investors had 'still made no case for changing Electra's successful, proven model'.

'Sherborne is an activist investor with a short-termist track record focused on cost-cutting: today’s letter does nothing to change that,' he added.

'The board, which plans to issue a full rebuttal of Sherborne’s letter in due course, stands by Electra’s excellent track record.'

1 comment so far. Why not have your say?

Broomtree

Oct 16, 2015 at 18:54

Trying to understand the valuation on this - you show:

Estimated NAV = 2237.00 - Share Price = 3423.25 [this looks like a large premium?]

You then show:

Yesterday's Closing Price Discount / Premium Diluted

Ordinary Share 1375.0 -38.5% [this looks like a large discount?]

HL show the current discount as = -10.59% and the average annual = -13.8%

How do we make sense of the difference here?

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