Activist investor Edward Bramson’s hedge fund Sherborne Investors is renewing its attempts to gain greater control of Electra Private Equity.
In a statement issued Wednesday, Sherborne said it had sent a letter to Electra chairman Roger Yates on 20 February “proposing a resumption of discussions about board representation and participation in an expanded review of options to increase Electra’s shareholder value.”
In a brief statement today, (26 February), Electra confirmed receipt of the letter, and said Yates had agreed to the meeting with Bramson. The date of the meeting has yet to be set.
In October 2014, Sherborne called an extraordinary general meeting at which shareholders voted to reject Bramson’s proposal to join the London-listed trust’s board, to install former Sherborne chairman Ian Brindle on the board alongside him, and to oust director Geoffrey Cullinan.
Following the meeting, Electra announced a review of the London-listed investment trust’s fee arrangements, capital structure and distribution policy, and in the results of the review, announced earlier this month, said it would be implementing a dividend policy.
“Sherborne Investors has renewed its proposal, made in July 2014, to appoint Ian Brindle, Edward Bramson and a new independent director to the board of Electra,” Sherborne said. “Sherborne Investors has advised Electra that, if such discussions are not successful, it intends to requisition a general meeting of shareholders of Electra to propose these appointments.”
Sherborne also announced that it has placed 107 million new ordinary shares to existing Electra shareholders, raising gross proceeds of £100 million. This will be used to repay Sherborne’s outstanding borrowings and to further invest in Electra “if appropriate”.
Sherborne has been gradually increasing its stake in Electra, last week pushing its shareholding up to 25.16 percent, and may have used debt to do so.
In its interim results, published in August last year, Sherborne said it had entered into a £50 million (€68 million; $76 million) unsecured term loan facility with a bank which “may be used to purchase shares, debt or derivative securities of Electra Private Equity, plc. through 31 December 2014”.
It seems likely that Sherborne will seek to increase its stake in Electra up to 29.9 percent. If the hedge fund’s shareholding reaches 30 percent then it will be forced to make a cash offer to take over the entire investment trust.
In a statement on Sherborne’s letter and the stock placing, Liberum Capital noted that even with an increased shareholding, Sherborne is unlikely to win a vote if an EGM is called should the remaining shareholders vote the same way they did last October.
“Assuming that the additional stock purchases since that date (1,878,655) were acquired from shareholders that had voted in favour of ELTA at the first EGM, all other voters do not change their voting preferences, and the total number of voters is unchanged, Branson would receive 45% of the vote at a second EGM.”
Electra’s annual general meeting is set for 16 March.
Electra shares were up 2.35 percent at 10.57am, at 3,137 pence per share, giving the investment trust a market capitalisation of £1.09 billion.