Sherborne ups ante in F&C pursuit

F&C Asset Management’s rebel shareholder Sherborne Investors stepped up its attack on the current board yesterday with a critique of its strategy.

In a letter to shareholders, Sherborne said it had invested in F&C due to its persistently poor performance compared with peers and it believed investor concerns over strategy were the cause of its low valuation.

F&C chairman Nick MacAndrew called the letter “a partial and flawed critique of the past” and said Sherborne had not offered an alternative strategy.

Sherborne’s move escalates its bid to take control of F&C ahead of a meeting on 3 February to decide whether to replace MacAndrew and director Brian Larcombe with Sherborne representatives.

“We believe that F&C’s many strengths have not been reflected in the performance of its share price,” the letter said.

Sherborne, which has built up a 17.6 per cent stake in F&C since August, argued that the decisions to buy REIT Asset Management in 2008 and Thames River Capital last year saddled F&C with debt, diluted shareholders’ interests and generated income from volatile performance fees rather than steady management fee income. Sherborne also criticised F&C’s debt management, arguing that a renegotiation of debt terms in 2009 caused a dividend cut.

“We believe that the company’s financial policy…has caused reductions in shareholder value that were avoidable,” it said.

MacAndrew said Sherborne had “misunderstood the economics of and rationale for the acquisitions... both of which were overwhelmingly supported by shareholders.”

He added Sherborne had not addressed concerns that its three proposed board members – Edward Bramson, Ian Brindle and Derham O’Neill – lacked the experience to run the firm.

Numis analyst David McCann said the letter left shareholders “still none the wiser as to what Sherborne might do differently if it were to get in.

TIME LINE | SHERBORNE’S STAKEBUILDING

17 August:
Sherborne Investors buys 5.2 per cent stake in F&C for £15m. F&C’s shares rise 23 per cent.

18 August:
Sherborne raises stake to 9.7 per cent to become F&C’s second-largest shareholder.

20 August:
Sherborne adds 0.5 per cent to its stake, taking it to 10.2 per cent or 52m shares, worth £32.9m.

26 August:
Sherborne increases stake to 11.3 per cent, worth £36.2m.

31 August:
Sherborne raises stake to 14.6 per cent

16 December:
Sherborne calls an extraordinary general meeting to oust F&C chairman Nick McAndrew and director Brian Larcombe and replace them with three of its choice.

20 December:
Sherborne cashes in further share options to raise its stake to 17 per cent.

6 January:
F&C appeals for shareholders to vote against Sherborne at the EGM.

14 January:
F&C publishes plan to restructure its operations and cut £12m costs.

19 January:
Sherborne sends letter to shareholders criticising F&C’s strategy; F&C rebuffs allegations.

3 February:
EGM and vote on board to take place.