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Electra urges shareholders to reject Bramson resolution

Chairman Roger Yates claims that the presence of activist investor Edward Bramson on the listed investment trust’s board “would potentially be divisive and value destructive”.

Electra Private Equity chairman Roger Yates has urged shareholders to vote against a resolution submitted by significant shareholder Sherborne to change the board composition at the London-listed investment trust.

Commenting on a circular to shareholders sent ahead of a 5 November general meeting requested by Sherborne to vote on its resolution to install Edward Bramson and Ian Brindle as board members, Yates said that Bramson’s “presence on the board would potentially be divisive and value destructive and, accordingly, the board urges all shareholders to vote against the Sherborne resolutions”.

The circular claimed that Bramson and Brindle’s appointment to the board would be a “radical change” that “would risk introducing confusion to existing and prospective portfolio businesses over Electra’s investment strategy”.

This is the second time that Sherborne, which holds a 29.28 percent stake in Electra, has requested a shareholder vote on its proposals for Bramson and Brindle to join the board. In October 2014, 62 percent of shareholders voted against the plan. At that time, Sherborne held about 20 percent of shares.

In a letter to its board on 18 September, Sherborne said that “increasing levels of risk” associated with a change in Electra’s strategy and portfolio, as well as “scope to improve effective corporate governance”, meant that “additional informed and engaged board oversight, exclusively aligned with shareholder interests is strongly warranted at this time”.

The letter claimed that the “operating performance of its portfolio investments offers a valuable opportunity for improvement to the benefit of all shareholders. We believe that our nominees, Mr Ian Brindle and Mr Edward Bramson, are well qualified to assist in the board's consideration of both the risks and the opportunities that we see”.

Yates countered in the circular that Electra’s management team “are continuing to deliver excellent investment returns for shareholders” and rejected the need for a turnaround. Electra’s board has asked Sherborne to share its views on where shareholder returns can be improved and that it had failed to make a case to shareholders, Yates wrote.

Sherborne is thought to dispute its characterisation in the circular as a short-term activist investor and the interest in cost-cutting cited.

Electra has delivered an annualised return on equity of 13 percent over the past 10 years, within its target range of 10-15 percent. As of March 2015, it held 29 unlisted direct investments, six secondaries portfolios, seven listed investments and 15 fund stakes.

Electra announced yesterday that its portfolio company AXIO Data Group had agreed to sell its Asin healthcare information business to SMS and Mitsui for $250 million. The firm invested £91 million in the company in April 2013.

It is anticipated that Sherborne will respond to the circular in due course. 

The firm declined to comment.