F&C defends itself against rebel investor shake-up

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The Independent Online

F&C Management yesterday launched a staunch defence of its business against the American activist investors it said were attempting to seize control of the fund management company on the cheap.

Sherborne is trying to oust chairman Nick MacAndrew and non-executive director Brian Larcombe. The firm wants to replace Mr MacAndrew with its founder Edward Bramson and two other directors.

But F&C said Sherborne – which has yet to give any indication of what it might do differently – could do "lasting damage" to the business and warned that the appointment of the new directors would violate best corporate governance practice which holds that a chairman should be independent when appointed to a company board.

In a letter to shareholders, F&C's senior independent director, Keith Bedell-Pearce, said: "The board is unanimous in its belief that Sherborne's resolutions are not in the best interests of F&C's shareholders as a whole. They may also have a materially negative impact on F&C's relations with other key stakeholders including staff, clients, investment consultants, financial advisers, fund rating agencies and other distribution partners.

"The resolutions come at a time when stability has finally been achieved after a prolonged period of damaging ownership uncertainty and when the board is united around a clear turnaround strategy, which is working."

F&C has also voiced concerns about the lack of fund management experience of Sherborne's proposed directors and has raised the matter with the Financial Services Authority, which will have to approve their appointments if the EGM succeeds given F&C's status as a regulated firm.

Chief executive Alain Grisay said the company had attempted to contact Sherborne to ascertain its intentions but said this had proved "frustrating".

"They don't appear to have an alternative strategy and appear to want to get control of the company on the cheap."

Mr MacAndrew said that even Eureko, the European insurance group that once held majority ownership of F&C, had only had two directors on the board, neither of whom was the chairman. The same was true of Friends Provident, the UK life insurer, which has also previously held a majority stake in F&C.

F&C remains a relative rarity in the City for being willing to take a public stand on governance issues and its governance unit has won high praise.

However, Mr MacAndrew warned that a successful EGM by Sherborne risked the type of "governance failure" that was seen at banks during the financial crisis and which has blighted Britain's economy.

Sherborne is expected to respond over the next week. It has a history of taking stakes in businesses and turning them around but these have not included regulated businesses like F&C which are dependent on the goodwill and support of staff.

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