The decision by LMS to suspend all investment activity and concentrate solely on realising its investments marks a victory for a group of activist shareholders led by LMS chairman Robert Rayne. However, Rayne has been asked to resign from the board, the firm said.
The activists, known as the ‘Concert Party’ in documentation, together hold about 35 percent of LMS’ shares. Their request that the company be broken up was made last month, and came as a result of LMS shares trading at a significant discount to net asset value.
The decision by LMS will serve as a warning shot to other listed groups, many of whom have been under pressure from activist shareholders to narrow their share price discounts to NAV or pursue a winding-up strategy.
An independent committee, comprising LMS’ non-executive directors (and excluding Rayne) chaired by John Barnsley, “sought to structure an exit for the Concert Party but it has not been possible to establish a price at which the Concert Party would be willing to sell its holding and at which buyers for those shares could be found in current market conditions”, the firm said in a statement.
It added: “In consequence, the committee no longer believes the status quo is sustainable, given the wide discount at which the company’s shares trade (along with the shares of other similar companies).”
The committee concluded: “Whilst it has every confidence in the incumbent management team led by Glenn Payne, it would be in the interests of shareholders as a whole for a new strategy to be implemented which would require the company’s portfolio to be realised in an ordery manner. This strategy would be expected to achieve a balance between an efficient return of cash to shareholders and maximising the value of the investments. No new investments will be made.
“The committee proposes that this strategy be implemented, under its supervision, by the incumbent management, with a streamlined cost structure and suitable incentive arranges in place to align management’s interests more closely with the shareholders under the new strategy,” the statement added.