Hambro cleans up after US air group calls off legal challenge

An activist fund manager, Christopher Mills, has won an important victory against an American aviation services firm, which sued him when he tried to shake up its management.

Mr Mills, a director of JO Hambro Capital Management, was accused by the California-based Mercury Air Group of making false statements to the US Securities and Exchange Commission and misusing secret trade information.

The accusations came after Hambro led a group of investors, including serial entrepreneur Luke Johnson, who took an 11 per cent stake in Mercury and tried to shake up its management.

However, last week Mercury withdrew all its accusations, dropped its legal actions and agreed to buy Hambro's stake and cover certain expenses and claims for $3.59m (£2.04m). The price works out at a 30 per cent premium on the amount Hambro paid for the shares, and nearly twice Mercury's current share price.

A US judge had earlier dismissed one of Mercury's claims against Hambro's group "with prejudice". Hambro had always denied Mercury's accusations that it had misled the company about its intentions when it invested in Mercury. In turn, Hambro had accused Mercury's directors of giving themselves excessive and unmerited rewards.

Mercury had previously set up a special committee, which is now reviewing a number of concerns about the directors' stewardship of the company.

Mr Mills said he was delighted with the settlement. "This clearly vindicates our position, and our clients have made a good profit," he said.

Joseph Czyzyk, chief executive of Mercury, said that the group had found its claims against Hambro "unworthy of pursuing", adding: "The estimated legal expenses in connection with our claims and additional anticipated protracted litigation necessitated this action."

Mr Mills has a reputation as an investor who tries to buy into underperforming companies and then put pressure on them to do better.