Electra seeks to ditch wind-up plan in favour of fresh fund-raising

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The Independent Online

The board of Electra, the UK's biggest private equity investor, is to seek shareholder approval early next year to raise new investment funds and continue in business.

The board of Electra, the UK's biggest private equity investor, is to seek shareholder approval early next year to raise new investment funds and continue in business.

The move is a reversal of the policy of winding the trust up and returning the proceeds to shareholders that was adopted 18 months ago to beat off a hostile bid from rival 3i.

However, there has been pressure from shareholders to reconsider in the light of the huge expansion of the European private equity market in the past two years.

The attractions of the investment trust as a vehicle for fund raising as opposed to the limited partnerships favoured by the US private equity firms has been increased by changes in UK rules allowing investment trust greater freedom to buy back shares.

Given the speed with which Electra has managed its disposal programme and paid off the £838m of debt that was used to fund the share buyback, the board believes the time is ripe to reconsider its strategy.

Brian Williamson, chairman, said yesterday, that firm proposals will be put to Electra shareholders in time for the next annual meeting on 28 February.

"We are still looking at a wide range of options but we believe that it is the duty of the board to make a recommendation."

Since Electra began selling off its portfolio in March 1999, the trust has realised £971m from asset sales. That is equivalent to 75 per cent of the £1.36bn, at which the portfolio was valued at on 28 February 1999, putting it well ahead of schedule. Allowing for subsequent revaluations, £1bn of mainly unquoted assets remain, although these are to a large extent immature investments which it may make sense to hold.

Of the total disposal proceeds, £723m came from sales of unquoted investments and £248m from quoted investments. The biggest single disposal was the sale of 33 per cent of South Korea's Locus for £66m. Electra made its original investment of £9.6m in January 1999.

Big profits were also made this year from the takeover by Chase of Robert Fleming, the City firm, where Electra had a small stake and the refinancing of Inchcape, the distributor.

Hugh Mumford, chief executive said yesterday that Electra was assisted in the earlier stages of its disposal by the revival of investor interest in smaller capitalised companies. There has also been a huge inflow of funds from the United States looking to invest in unlisted situations.

As a result Electra has been able to sell out at higher prices than it originally anticipated. Most of the assets have gone to financial buyers. Net asset value in the year ended 30 September rose by 14.1 per cent to £10.85. Over that period the FTSE All Share index rose by 7.2 per cent.

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