90 days for MGPE to find solution

Investors in Morgan Grenfell’s E1.5bn fund will be asked to vote over a new financial plan following last week’s events.

Morgan Grenfell Private Equity’s (MGPE) Deutsche European Partners IV E1.5bn fund is in suspension for 90 days. The time will enable MGPE to come up with an alternative business plan following the sudden departure of its chief executive Graham Hutton and its failed management buyout.

All the investors in the fund apart from Deutsche Bank, Morgan Grenfell’s parent company which has a 20 per cent stake in the fund, can vote over the ownership of MGPE. If more than 75 per cent of the investors, which include the Bank of England Pension Fund and Abbey National, vote against MGPE’s proposal, then the investors have the right to come up with an alternative within 30 days. At this stage Deutsche will be able to use its own vote.

Graham Hutton, the former chief executive of MGPE, was one of the main proponents of an MGPE MBO, initiated last year. However, when MGPE made a paper loss of E240m after it sold its 12.5 per cent stake in SLEC, the holding company of Formula 1, to German media group EM.TV, the MBO idea began to turn pear shaped.

This coincided with parent company Deutsche Bank’s announcement last November that it was restructuring the group, which put the whole idea of an MBO on the backburner. Meanwhile the tensions around the buy-out plans also saw the departure of three investment directors.

Sir Robert Smith, who established MGPE in 1989, is the new CEO of the firm. He still retains his role as vice chairman of Deutsche Asset Management. During the 90-day suspension period, which began last week, he will put forward proposals for the fund. He is understood to be working with Deutsche to offer MGPE’s investment directors retention packages.