Caledonia fights plan by rebel shareholders to split trust

Caledonia Investments urged investors to reject fresh proposals from a group of rebel shareholders to restructure the investment trust yesterday.

The rebels, which include some members of the Cayzer family, claim the backing of about one-fifth of the company's shareholders, including Schroders and Hermes.

Their latest proposal would see a new Guernsey-based fund - the Cayzer Continuation Company - take over the family's holding in Caledonia from the Cayzer Trust, while another fund, the Cayzer Realisation Trust, would sell off Caledonia's assets.

Caledonia Investments is about 40 per cent owned by the Cayzer Trust, a investment vehicle for the Cayzer family which made a fortune from shipping in the last century and set up the fund manager Gartmore. There are more than 300 beneficiaries of the family trust.

Some members of the family, including Sir Peter Buckley, Cayzer Trust's chairman, wants Caledonia to continue in its present form. But the rebels, who include Sir John Craven, Nigel Cayzer, Lord Rotherwick and Ian Molson, say their proposals would help to narrow the gap between Caledonia's share price and its net asset value, as well as providing a way for the trust to sell assets without incurring huge tax liabilities.

The trust's largest single investment is a 17.7 per cent stake in the investment bank Close Brothers.

The rebels say their plan would enable shareholders in Caledonia and the Cayzer Trust to either cash in their holdings for an amount that reflected the value of the underlying assets, or to hold on to a more diversified portfolio. "It is very hard to make changes to the portfolio of assets without incurring huge tax liabilities," a spokesman for the dissident group said.

Caledonia's board said it had unanimously rejected similar proposals at a meeting in July after consulting its advisers NM Rothschild and Cazenove. The company told investors that the rebels' proposals "include no firm cash offer and provide no certainty as to the level of proceeds.... The board of Caledonia believes the proposals would be likely to result in the level of proceeds received eventually by shareholders being at a significant discount to the prevailing net asset value".

Tim Ingram, the chief executive, said yesterday: "We have considered these proposals carefully and concluded that they are not in the best interests of our shareholders. They would only have served to destroy a company that has been producing outstanding returns in the short, medium, and long term."

Caledonia became an investment trust earlier this year in order to benefit from tax advantages.

Shares in Caledonia closed up 32.5p at 972.5p yesterday. Its net asset value per share was 1,154p on 31 August.