Close to £500m to be returned to shareholders over the course of three years
Shareholders of the Electra Investment Trust are to receive details of its impending tender offer of up to £150m and revised investment strategy by the end of May.
In announcing the timetable for its third tender offer to shareholders, the board of the trust has specified 3pm on 16 June as the last date of receipt for tender forms, with the result announced on 25 June. Settlement will take place on 29 June.
Under the tender offer, shares will be acquired at the tender price, the NAV at 31 March, adjusted to the calculation date, 16 June 2001.
Shareholders will be entitled to have a percentage of their holding repurchased under the offer and may request the repurchase of additional shares. However, these will only be satisfied to the extent that other shareholders do not tender their full basic entitlement.
Assuming full take-up of this third offer, the total cash returned to shareholders will rise to £945m.
Hugh Mumford, Electra's chief executive, has confirmed that two-thirds of future cash investment realisations, estimated to be close to £500m, would be returned over the next three years via a combination of share buy-backs and regular tender offers.
The remaining cashflow will be invested in private equity opportunities including, subject to feasibility, an investment in the group's new European management buy-out fund.
According to Carolyn Coke, analyst at Deutsche Bank, Mumford has given several reasons behind the board's change in policy.
These include the slowing economic environment, its impact on future realisation dates and the value of the portfolio.
Another factor is the limited attractions of Electra as a small investment vehicle, regarded as a forced seller of existing holdings.
Coke said: 'Cash realised from the existing portfolio will not exclusively be returned to shareholders as one-third will be reinvested. This will effectively delay the distribution of cash to shareholders. For example, for £500m to be returned to shareholders, £750m has to be realised from the portfolio.'
Over the six months to 31 March, the NAV of the trust has fallen 11.4% to 962p, compared with a fall of 10.5% in the FTSE All-Share Index.
Brian Williamson, chairman of the trust, said that while the performance of the UK unlisted portfolio has not changed significantly since 30 September 2000, a number of unlisted investments in the US have been affected by a slowdown in consumer spending and a more difficult banking environment. He added that provisions of £51m have been made to reflect difficulties being experienced by companies in the US and South America.
Williamson said: 'The board remains committed to its policy of maximising value for shareholders and returning the bulk of proceeds from realisations.
'Although concerns about a downturn in the global economy have affected the climate for realisations in the short term, the board believes the updated investment strategy will give the manager greater flexibility to deliver value, make limited additions to the portfolio at attractive prices and continue to return substantial proceeds to shareholders.'www.ifaonline.co.uk
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