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Electra rejects activist Bramson's restructuring proposals

Electra rejects activist Bramson's restructuring proposals

Electra Private Equity has turned down activist shareholder Sherborne Investors Management's requests for a change of directors and strategy at the trust.

Sherborne, led by Edward Bramson (pictured) built a 10% stake in the trust back in February, which has risen to 19%. Electra non-executive chairman Roger Yates said he met with Bramson last week and turned down his requests for the appointment of three new directors, one of whom would be Bramson with the other two unidentified individuals to be nominated by him. Yates said he also rejected Bramson's call for a mandate to lead a strategic review of the company.

The company said in a statement: 'The board of Electra has a long-standing policy of being comprised wholly of independent non-executive directors. Mr. Bramson, representing a c.19% shareholder in the company, would not be independent. The company's consistently superior performance over the long term provides clear evidence to support this policy of complete independence.'

The board stressed the trust's long-term performance remains strong, up 268% over 10 years versus a 129% rise by the FTSE Allshare over the same period. It is currently trading on a discount of 8.7%  

Analysts Liberum said while it is positive that Bramson's intentions are now known, the ructions could result in short-term price weakness and it has a 'neutral' outlook for the trust.

Liberum said: 'ELTA's management team is one of the most highly regarded in the sector and we would expect the majority of the existing register to be supportive of the board's stance. ELTA has delivered strong returns for shareholders over the long-term and it could not be argued that this is a mis-managed business.

'Sherborne focuses on investing in public companies that have underperformed due to operational issues but have the potential to increase profits substantially on the back of a turnaround strategy. ELTA does not appear to be a natural fit for this strategy.'

Max King, a strategist at Investec, said he is 'wholly supportive' of the board's decision to reject Bramon's proposals.

'The duty of directors is to each represent all shareholders. We do not believe that the directors proposed by Mr Bramson would do more than represent his own interests,' he said.

'We see no need for a “strategic review” other than the ongoing strategic review of the business which it is the duty of the board to continue at every board meeting. Mr Bramson’s request implies some unspecified change of direction, the need for which is far from apparent. Any change is more likely to be for the worse than the better, in our view.'

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