F&C poised to discover its real friends

By This Is Money
Updated: 06:39 EDT, 2 February 2011

F&C shareholders are being asked to support the management or back a rebel investor who wants to oust the chairman. Ben Laurence investigates in a City Focus.

Showdown: F&C faces a tussle with Sherborne at shareholder meeting

This is a company whose shareholders have every right to feel upset: its share price, which topped 200p little more than three years ago, is now 86.85p.

It has cut its dividend - not once but twice. Yes, F&C Asset Management is vulnerable. It is a business in dire need of friends.

And tomorrow, the business will find out just how many friends it really has. F&C, which can trace its roots back 140 years, faces a challenge.

Shareholders are being asked to decide whether to support F&C's current management - or back the call from a rebel investor who wants to oust the fund manager's chairman, Nick MacAndrew.

One man stands centre stage in the tussle for control of F&C. He is 59-year-old Edward Bramson.

Over decades, he has made his name as an 'activist investor', buying stakes in underperforming companies and cajoling their managements into raising their game. And in Britain, Bramson has been successful.

He bought into 4imprint, a company providing marketing materials, in 2003. The share price was 42p. Bramson took the chair.

Two years later, when Bramson said he was prepared to quit the chairmanship, 4imprint shares were 110p.

At chemicals group Elementis, Bramson also showed a tidy profit. Through Hanover Investors, he took a 10% stake in January 2005, when Elementis shares were 32p. Again, Bramson took the chair. By September 2006, the shares were 90p.

And at telecoms technology operation Spirent, Bramson's group Sherborne Investors built up a stake of almost 15% in 2006. The share price was between 34p and 44p. Bramson successfully organised a shareholder revolt and was installed as chairman.

By the time he quit in March 2010, Spirent shares were 125p.

It is an impressive record.

But as F&C gleefully points out, Bramson has had failures, too. For two decades from 1987, Bramson had effective control of a Californian company, Ampex, selling recording systems.

Between orchestrating the takeover of the group and quitting as chairman in 2007, Ampex's valued tumbled from $479m to less than $10m. It became overwhelmed by debt, and in 2008 had to file for bankruptcy.

Furthermore, in 2007, Bramson's Sherborne bought into Nautilus, a manufacturer of fitness equipment. True to form, a clutch of directors were ousted and Bramson became chairman - a position he still holds.

But during the period of Sherborne's involvement, Nautilus's share price has collapsed by more than four-fifths.

Reclusive: Sherborne founder Edward Bramson has made his name as an 'activist investor' over decades

It already holds more than 17% of F&C. That provides a useful platform from which Bramson can try to oust MacAndrew from the fund manager's chairmanship and install himself instead. (Sherborne also wants to get rid of Brian Larcombe from the F&C board and appoint two of its own representatives.)

On top of Sherborne's stake, Aviva, which holds around 9% of F&C, has already given its backing to the coup attempt.

Aviva's position is intriguing. It is not only a shareholder in F&C; it also owns 19.5% of Sherborne itself. As soon as Sherborne unveiled its plans, Aviva gave them its support. Of course, if Aviva and Sherborne were acting together, they would have to say so, declaring a 'concert party'. That has not happened.

But in any case, Bramson can count on Aviva's support: of the votes that will determine F&C's future, he already has around 26% in the bag.

So far, only Eureko, the Dutch insurer with 10% of F&C, has said publicly that it will back the fund manager's incumbent board. So is Bramson assured success?

Through Sherborne, he has been vocal in attacking F&C's record - but completely silent on what he would do differently.

And when challenged over whether Bramson would take a hands-on executive position at F&C, Sherborne says that he would do so only if he had to - for example, if the current chief executive Alain Grisay leaves.

This is disingenuous. Grisay has spearheaded F&C's struggle to repel Sherborne. Were Sherborne to win tomorrow, it seems inevitable that Grisay would quit - hence Bramson would take the reins.

Furthermore, investors' experiences with New Star and Gartmore over recent years have demonstrated vividly and painfully how easy it is to see a fund management operation go into meltdown.

One major F&C shareholder said yesterday: 'You tamper with these businesses at your peril.'

And Sherborne has failed to quell the suspicion that if it secures a degree of control at F&C, it will be looking to raise money through a rights issue. Institutions who have met Sherborne say the idea has indeed been floated. Sherborne, meanwhile, insists that any discussion has merely been hypothetical.

F&C may not be loved by its shareholders. But neither has Edward Bramson dispelled their fears of the risks that an upheaval might bring.