Electra uses cash to strike back at activist Sherborne

Electra, the listed British private equity group fighting off an activist campaign led by Sherborne Investors, is to begin returning cash to shareholders.

Announcing the results of a strategic review on Wednesday, Electra said it would aim to give back cash each year equal to 3 per cent of its net assets, including a dividend for the first half of its current financial year.

Sherborne, the investment group headed by US investor Edward Bramson, owns a quarter of the buyout house, having recently increased its stake by borrowing bank debt to buy more shares - an unusual step for activists.

Shareholders rejected a move by Sherborne to appoint three directors to Electra's board in October, with only 11 per cent voting in favour.

Although Mr Bramson also asked for a strategic review last year, Wednesday's announcement comes after points were raised by other Electra shareholders.

In its review, Electra said that it would stop charging a management fee on cash held on its balance sheet. It will also cut the fee from 1.5 per cent to 1 per cent on investments it no longer regards as key to its business, such as stakes in listed companies.

Electra will retain the 18 per cent share of profits on deals, or carried interest, received by its partners on direct investments.

The group had net assets of £1.1bn as of September 30 last year, with two-thirds of its investment portfolio in unlisted companies.

"We believe the new agreement with Electra Partners delivers improved value for all of our shareholders, while also keeping sufficient incentives and the financial means to continue our successful investment strategy," said Roger Yates, Electra's chairman.

Electra has a high proportion of cash on its books after a recent run of selling investments, and because of hedging currency risk on other investments. The recent sales also mean that its portfolio contains relatively new investments, with four-fifths three years old or less.

The fund has returned 14 per cent per annum over the past 10 years.

Oriel Securities analyst Iain Scouller said: "Do shareholders really want cash back, when returns on cash are derisory, compared with Electra's good long-term performance record?"

Shares in Electra, up nearly 30 per cent since October's shareholder meeting, were unchanged at £30.30 in early London trading on Wednesday.

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