F&C strikes back at Sherborne in performance statement

F&C has said activist investor Sherborne has “misunderstood the economics” of its Thames River and Reit Asset Management acquisitions, as it announced its first year of net inflows in four years.

The asset manager says Edward Bramson’s buyout vehicle Sherborne should answer some questions itself, in a bid to turn the tables on the group which levelled accusations of poor management at the F&C board in a letter on January 19.

The statement comes ahead of the February 3 general meeting in which F&C shareholders will vote on whether to accept a leveraged buyout from Sherborne.

It says: “Will Bramson’s executive chairmanship of Nautilus, a US based manufacturer of gym equipment, the share price of which has fallen around 75% since Sherborne acquired its around 20% interest, together with his other responsibilities, allow him to carry out properly his proposed role as chairman of F&C? Will Bramson confirm that neither he, nor any other of Sherborne’s nominee directors, will take any executive role at F&C?

“F&C has already announced an annual cost saving programme of £12m. How does Sherborne intend to improve F&C’s profit margins further, whilst protecting client service standards and investment performance? (article continues below)

“Does Sherborne intend for F&C to raise further equity capital, potentially underwriting any such issue, thereby requiring shareholders to invest further or be diluted?”

The statement shows F&C’s assets rose to £105.8 billion at the end of last year, compared with £97.8 billion a year before, with postive net business flows in the fourth quarter of 2010 and for the full year.

It cites improving fee margins, saying Thames River is performing well with 65% of its assets now in products with performance fees that are at or within 5% of their high water marks.

It says: “Reit and Thames River have accelerated the improvement in average fee margins and have contributed to the increased proportion of revenues derived from non-insurance clients. Both acquisitions have enhanced the group’s product range and investment expertise and have helped strengthen the group’s management team.

“The structure of both transactions, including the use of contingent consideration, ensures that the maximum consideration only becomes payable in the event of significant value enhancement for F&C shareholders.”

Sherborne issued a response this afternoon, saying it wishes to appoint three non-executive directors to the F&C board who would devote an appropriate amount of attention to the firm’s activities.

* Note: This story was updated at 3:03pm