Electra investors look to takeover bid
Sunday 14 February 1999
Two weeks ago, 3i tabled an indicative offer of about 700p per share. But Electra rebuffed the advance and, according to a source close to the company, instructed Lazard Brothers to approach other potential bidders.
"It's still a phoney war," said David Irskine, a fund manager at Standard Life, which owns a 3.75 per cent stake.
"No bid has actually been made. What we're looking for is full valuation. We are confident that one way or another we will get it. But we don't want to go back to the situation as it was before 3i appeared."
Before talks between Electra and 3i began in January, EIT shares were trading at a 15 per cent discount to the net asset value of the company's portfolio. Electra has commissioned auditors PWC to calculate the current value of its portfolio, but City analysts currently put it at around 730p a share. Potential bidders include US buyout firms Blackstone Group and Kohlberg Kravis Roberts, but neither have confirmed an interest.
A source close to 3i conceded that several US firms were looking at Electra but - being used to working on larger scale start-ups than those backed by EIT - were finding the company's portfolio "messy".
If no satisfactory bid emerges, EIT says it will turn itself into a realisation fund - winding down its portfolio of investments over three to five years. Michael Stoddart, EIT chairman, has postponed his retirement - due at the AGM - until the issue is resolved. "They have a variety of options," said Iain Scouller, investment trust analyst at Warburg Dillon Read. "The City has a lot of confidence in management."
Nevertheless, analysts wonder if selling off EIT's portfolio of investments would produce any sort of premium for shareholders. On Friday, EIT shares closed at 672.5p.
Neither side in the ongoing discussions between Electra and 3i will comment. But it is understood that Electra feels that 3i has made a hash of its bid because it keeps changing its mind about what it wants.
3i believes time is on its side as the AGM approaches and no firm rival bid has emerged.
Electra's AGM is only a formality. There are no special resolutions on the agenda about the 3i bid or its future. But questions from the floor could stir up shareholder concern that action be taken.
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