NEW YORK (TheStreet) -- New York activist investor Edward Bramson came back, bloodied but unbowed, from last October's defeat by the board of London-listedElectra Private Equity at a shareholders' meeting he himself had called.
Like a Hollywood action man, he brushed himself off and returned to the fray last month with a renewed campaign to insert himself and two other directors into the boardroom and once again demanded participation in an expanded review of the business.
But his gradual and deliberate stake building, from 20% of voting shares at the time of the shareholders' meeting to the 27.59% announced on Monday, March 23 -- including 1% of voting rights derived from buying convertible bonds -- makes him look more like a backroom plotter who knows revenge is a dish best served cold.
Having built up his holding to 25.16% by the time he reopened hostilities on Feb. 25, he then went back to backers of his own listed vehicle Sherborne Investors (Guernsey), to raise another £100 million, or about $148.9 million. The stated aim was to repay the funds he had already borrowed to finance his attack on Electra and, if appropriate, to make further investments in its securities.
Yet at last week's more routine annual meeting of Electra shareholders he was clearly not yet ready to roll his tanks back into the purlieus of St. Paul's Cathedral to threaten the private equity firm at its front door. He will likely build up his voting stake to the maximum 29.99% permitted under the U.K. Takeover Code before he is required to make a general takeover offer for the whole company. But he might still not be confident he has the backing from other investors to take aim and fire.
In the annual vote for the re-election of the board, about 10.9 million shares were withheld for each director except non-executive director Geoffrey Cullinan, the individual whom Sherborne had tried to oust in October. In Cullinan's case almost 11.9 million votes -- close to 35% of total shares -- were withheld. In all cases, more votes were held to have abstained than were directly owned by Sherborne at the time, suggesting there was at least some additional support from other quarters.
But analysts at JPMorgan Chase's JPMorgan Cazenove have done the math and suggest the Electra board still has a chance to fight him off.
Here's how they explained the calculus in a note after the March 16 meeting, taking the vote on Cullinan as the example: "In this case, 11.9 million shares were symbolically 'abstained.' The direct voting stake of Sherborne was last disclosed as 9.1 million shares, and we think it is fair to assume that they abstained. This implies that 2.8 million other shares (8% of total shares) are fully behind Sherborne, which is less than the 4 million other shares backing Sherborne at the time of the October 2014 vote."
They then went on to argue that even if Sherborne did build up to the full 29.99%, things might not go Bramson's way if he did decide to call another shareholders' meeting, which holders of at least 5% of a U.K. listed company's share capital are entitled to do. The analysts were working on the assumption that such a meeting would achieve a turnout of no more than the 79% of eligible voters achieved on March 16, and that any further shares that Bramson's vehicle might have gathered were all acquired from those who voted in favor of the existing Electra board last week. (Otherwise he would be cannibalizing his own support).
Yet even then, adding the 2.8 million shares who backed Sherborne last week, he would muster no more than 47.9% of the vote and would narrowly lose.
"As a result," they concluded, "our best guess is that the board will call Mr. Bramson's bluff over his threat to requisition another EGM to appoint him and his representatives to the board."
That said, however, Bramson has proved himself a canny operator in the past. As he casts a cold eye on Electra in the weeks to come, he may yet prove smarter than either J.P. Morgan or the Electra board.