18 Sep 2015 07:00
Electra Private Equity PLC
18 September 2015
Requisition for a General Meeting
Electra Private Equity PLC ("Electra" or "the Company") announces that yesterday afternoon it received from Pershing Nominees Limited on behalf of Sherborne Investors ("Sherborne") a requisition for a General Meeting at which resolutions will be proposed seeking to appoint Edward Bramson and Ian Brindle to the Board of Electra.
As shareholders are aware, this is the second time Sherborne has sought to achieve Board representation. At the General Meeting requisitioned by Sherborne in August 2014 and held in October 2014, resolutions proposing the election of Edward Bramson and Ian Brindle were rejected by shareholders. Since that time the Board has had dialogue with Sherborne, which has included three meetings between Mr Bramson and Electra's Chairman, other Electra directors and with the whole Electra Board. In addition, Electra Partners LLP (the Manager of Electra) ("Electra Partners" or "the Manager") has met twice with Sherborne as part of its investor relations activities. This latest requisition follows confirmation given to Mr Bramson that the Board of Electra remains unanimous in continuing to oppose his and Mr Brindle's appointment to the Board.
The Board of Electra remains convinced that the interests of all shareholders are best served by the combination of a Board that is wholly non-executive and independent of any significant shareholder, together with the continuing management of the portfolio by Electra Partners on an exclusive and wholly discretionary basis.
The reasons for the Board reaching this conclusion were set out in a letter, dated 12th August 2015, to Mr. Bramson and the text of which is reproduced as follows:
"Dear Edward,
Following our recent discussions, the Board of Electra has given very careful consideration to your request that you and Ian Brindle be invited to join the Board of Electra. Specifically we discussed the change in your proposition to the Board, namely that a specified role in a review of Electra was no longer part of your proposal.
The Board's duty is to review your latest proposition from the perspective of the interests of all shareholders, including Sherborne Investors ("Sherborne"). The Board of Electra remains convinced that the interests of all shareholders are best served by the combination of a Board that is wholly non-executive and independent of any significant shareholder, together with the continuing management of the portfolio by Electra Partners on an exclusive and wholly discretionary basis. A departure from the wholly non-executive and independent Board risks destabilising the current successful partnership between the Board and Electra Partners. In our view this outweighs the argument that Sherborne should have Board representation simply because it is a large shareholder.
At the same time the Board took into consideration your stated objectives as an investor - namely identifying companies "which [Sherborne] considers to be undervalued as a result of operational deficiencies and which [Sherborne] believes can be rectified by [Sherborne's] active involvement."* Indeed the interim report issued last week by Sherborne confirms this approach by stating, "it [Sherborne] continues to believe that Electra represents an attractive investment opportunity resulting from [Sherborne's] participation in an operating turnaround."* As we have pointed out to you before, the Board believes that this stated approach conflicts with the exclusive and discretionary mandate given to Electra Partners. In addition we do not believe Electra requires "an operating turnaround" either at the plc level or within individual portfolio companies. Finally and despite repeated requests, we have heard nothing from you on where you saw opportunities to improve the operational performance of any of our portfolio companies.
For all these reasons, the Board has decided unanimously not to offer you and Ian Brindle board representation.
If Sherborne, based on your advice, requisitions another General Meeting, you will be putting before shareholders a clear choice: On the one hand venturing into an uncertain future with unknown and unquantifiable risks to the relationships at both the Electra Partners and the portfolio company levels; and on the other hand, preserving the success and stability of the present arrangements which the Board believes are operating to the advantage of shareholders.
The choice will be for all shareholders to make. The Board's judgement and the Board's recommendation to all shareholders will be to stay with the current model which is delivering strong returns for shareholders.
We therefore urge you to follow this recommendation and advise Sherborne not to requisition a meeting to seek the changes to the Board that you have requested. Whether or not you follow this recommendation, we remain committed to maintaining an open dialogue with you as a representative of a major shareholder, in terms of the strategic direction of Electra and the performance of the portfolio, recognising the significant investment made by Sherborne. Notwithstanding any differences between us, our objective is to seek to ensure that Sherborne is a satisfied and supportive shareholder. If you would like further discussion about how we can all best achieve this, feel free to contact me at any time.
Yours sincerely
Roger Yates"
*Source: Half Yearly Report of Sherborne Investors (Guernsey) B Limited dated 7 August 2015 for the period ended 30 June 2015
The Board is unanimous in continuing to oppose the election of Mr. Bramson and Mr. Brindle to the Board of Electra.
Commenting on the requisition, Electra's Chairman, Roger Yates, said
"The Board of Electra believes that the interests of all shareholders in Electra, including Sherborne, are best served by maintaining a wholly non-executive and independent Board and a clear mandate to the Manager, Electra Partners. Board representation for Sherborne would clearly undermine that independence and create a high degree of uncertainty for both the portfolio companies and Electra Partners, leading to a substantial risk of value destruction."
Electra will send a notice convening a General Meeting to its shareholders in due course.
------------------------------------------------------------------------------------------------------------------------------------
The table below compares Electra's share price total returns to 16 September 2015 with selected benchmark indices, demonstrating consistent outperformance.
Benchmark | 3 years | 5 years | 10 years |
Electra Share Price Total Return | 88% | 148% | 210% |
FTSE All Share Share Price Total Return | 23% | 42% | 79% |
FTSE 250 Share Price Total Return | 53% | 87% | 184% |
FTSE Small Cap Share Price Total Return | 53% | 79% | 89% |
Morningstar Private Equity Index (excluding Electra) Share Price Total Return | 70% | 85% | 15% |
Calculated using Morningstar UK Limited as at 16 September 2015
Enquiries
J.P. Morgan Cazenove: +44 (0) 207 742 4000
Michael Wentworth-Stanley
William Simmonds
Greenbrook Communications: +44 (0) 207 952 2000
Andrew Honnor
Matthew Goodman
Matthieu Roussellier