Hostilities at one of Britain’s oldest private equity groups broke out on Friday after a Wall Street raider launched a strident attack on the board’s independence.
Edward Bramson broke cover in his assault on Electra Private Equity by pummelling the stewardship of the group and accusing the board, led by chairman Roger Yates, of “deficient” corporate governance.
Mr Yates fired back, accusing Mr Bramson of making “baseless criticisms” about how the investment firm is run.
The tussle springs from Mr Bramson’s demands for two seats on Electra’s board. Shareholders will vote on the issue next month.
“The hostile reactions of the investment manager and the board seem disproportionate to a proposal by a long-term shareholder,” Mr Bramson said.
Electra Private Equity employs Electra Partners as its investment manager to own and run businesses such as TGI Friday’s and The Original Bowling Company. Mr Bramson claims the firm pays fees to the manager that are too high.
He argues that if he and his ally, the former PwC accountancy boss Ian Brindle, were appointed to the board then they could double the value of Electra.
But not everyone is convinced. One Electra shareholder said: “The board have got a job to do, and once you have awkward people on the board, it makes it difficult for investors to do their jobs. The circumstances don’t improve corporate governance, it just creates friction and makes corporate governance worse.”
Mr Bramson’s investment vehicle Sherborne is Electra’s biggest shareholder with just under 30 per cent of the company.
Mr Bramson said yesterday that he would not try to wrest control of Electra if he bagged his two board seats, but he has earned a reputation in the City for doing the opposite. In 2011 he deposed the then chairman of the fund manager F&C and installed himself after a boardroom coup.
The British-born activist investor, who is notoriously shy of publicity, operates Sherborne out of a small office in New York alongside a young ex-Morgan Stanley banker called Stephen Welker, who many in the City identify as the numbers man in the relationship.
Those numbers were out in force yesterday in a letter to shareholders, penned by Sherborne, which claimed that Electra had made a return 39 per cent below that of the FTSE 250 index over the past five years. Sherborne said it would have cost a fund £10m to track the FTSE 250 over the same period, while Electra’s fund manager expenses were £250m.
Mr Yates said: “Sherborne is an activist investor with a short-termist track record focused on cost-cutting. Today’s letter does nothing to change that.”
