Electra to wind up if auction fails

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The Independent Online
ELECTRA INVESTMENT Trust, the buyout fund that rejected a pounds 1.2bn takeover bid from venture capital group 3I, said yesterday it will wind up the fund if the auction now underway fails to yield a good enough deal before 11 March.

The trust's chairman, Michael Stoddart, unveiled plans for a pounds 750m capital reconstruction if the approaches which have come in over the last few days from rival US private equity groups fail to translate into a knockout bid for the trust.

US financial investors Blackstone Group, GE Capital and Donaldson Lufkin Jenrette are among those believed to have registered interest with Lazard Brothers, Electra's advisers. Another American buyout specialist Clayton, Dubilier & Rice has made a separate approach for Electra Fleming, which manages the trust but is not interested in making a bid for the trust itself.

Electra Fleming is jointly owned by the Electra Investment Trust and Robert Fleming, the investment bank. Talks with 3I broke down after Electra failed to persuade 3I to raise its 705p indicative offer. Electra shares rose 10.5p to 685p yesterday.

Mr Stoddart confirmed yesterday that both the trust and the management team had received preliminary proposals which can now be evaluated in the light of the alternative proposals announced yesterday. "What we are saying is that an alternative to an offer from another party is an orderly wind up of our portfolio," he said.

The proposals involve: - a buyback of 40 per cent of Electra's shares via a tender offer;

- a halt on new investments except to meet existing commitments or to maintain the value of an investment;

- Electra Fleming will manage an orderly wind-up of the investment portfolio. The board expects the process to take a maximum of five years with "good prospects for attractive realisations of the portfolio over the next 12 to 18 months".

The reconstruction will also go ahead if a buyer is found for Electra Fleming which manages the portfolio but not for the trust. To finance the proposals, Electra Fleming has arranged pounds 750m of bank finance underwritten by National Westminster Bank and JP Morgan.

The terms of the tender, to be announced on 11 March, will depend on a revison of the official net asset value of the group, which has been promised for 28 February. Analysts expect the revised net asset value to be pitched at around 750p.