Dylan Lobo: Will Sherborne rebels force F&C to ditch Thames River?
Last year F&C Asset Management stunned the city by completing the acquisition of top funds boutique Thames River Capital.
However, nine months on there are real question marks over where Thames River fits in the F&C business model after the firm conclusively lost its boardroom battle with Sherborne Investors.
It saw its chairman Nick MacAndrew ousted and welcomed three Sherborne men to its boardroom in the process including founder Edward Bramson, who becomes its new chairman.
When F&C agreed to buy Thames River last April for around £53.6 million it initially looked like a great bit of business but critics questioned how the two firms would operate alongside each other.
This led F&C chief executive Alain Grisay to launch a fierce defence of his firm's strategy.
Six months after the deal was struck Grisay felt compelled to give the buy a ringing endorsement: 'It was very interesting to see analysts saying, "Gee that will never work, there will be a cultural shock between the two organisations', he said.
'Let me summarise what shock there has been, given how much work we did prior to the deal. It completed on 1 September and the integration office closed on 30 September. In the history of mergers this is incredibly rare.'
However, Grisay may find that he has little choice but to let Thames River go after Sherborne sunk its teeth into his firm.
The activist investor, which built a 19% stake in the F&C since buying in last August, has made its views on the Thames River buy clear. Essentially it has questioned F&C's desire to build a presence in the higher margin performance-based end of the market, something it had needed to do after becoming unfavourably dubbed a benchmark-plus firm in certain quarters.
In the run up to today's general meeting Sherborne founder Edward Bramson sent a letter to F&C shareholders criticising the buy, along with the REIT purchase of 2008.
The letter explained: 'The company's acquisition of REIT involves the investment of up to £160 million and its acquisition of Thames River Capital involves the further investment of up to approximately £180 million, including contingent payments and substantial expenses incurred in the transactions.
'The combined resulting cost of these two acquisitions could amount to approximately £340 million, which is greater than the entire stock market value of F&C - approximately £270 million, at the date Sherborne's shareholding was made public. Clearly, the total amount of growth that it is practical to acquire in this manner is severely limited, as the combined assets under management (AUM) of REIT and Thames River Capital amounted to only 8% of F&C's total AUM.'
In a series of heated exchanges that followed MacAndrew hit back, saying if Thames River had been such a bad idea F&C shareholders would not have voted unanimously in favour of it at the time.
This may have been so, but Bramson and co, while not exactly providing a clear cut strategy of their own for F&C during the exchanges, certainly exposed some flaws in the asset manager's model relative to the peer group.
The fact it won the EGM, which few expected it to do, suggests shareholders have decided it's time F&C had a makeover and believe Bramson's team are the men for the job.
Bramson has proved to be ruthless operator in the past with the way he ripped into telecoms firm Spirent and ovehauled its business back in November 2006 testament to this. He met the F&C executive committee yesterday afternoon and made it clear that he wanted Grisay to continue to run the business.
However, don't be surprised if he shows little sentiment towards Thames River and encourages his chief executive to put it back on the market less than 12 months after F&C pulled off what looked like to be real coup at the time.
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