Troy Asset Management’s Francis Brooke has criticised the board of Severn Trent for rejecting an offer for the company, a move which sent shares down 20 per cent.
Rumours of a takeover by a private equity consortium sent Severn Trent shares up sharply in early May, but when a formal bid of £22 a share was turned down by the company’s board the stock price plummeted.
Mr Brooke, manager of the £1.2bn Trojan Income fund, said: “Time will tell whether the rejection of the bid was in the interest of shareholders or not. Our view is that it will not be easy to regenerate that amount of shareholder value and that the board should have done more to facilitate the transaction.”
Severn Trent, Mr Brooke’s eighth largest holding at 3 per cent of the fund, was trading at £17.32 a share on July 12, an increase of 8.9 per cent, but down 20.7 per cent from its May 15 peak of £20.90.
During the course of June the Trojan Income fund lost 3.5 per cent but outperformed its FTSE All Share index benchmark, which declined 5 per cent.
“The inherently defensive nature of the portfolio did mitigate the [market falls] to some extent but this was a widespread markdown with few individual stocks showing positive returns,” Mr Brooke said. “Within the portfolio those holdings whose share prices did increase were Inmarsat, PayPoint, Jardine Lloyd Thompson, Rathbones and BSkyB.”
The Troy Trojan Income fund, a member of the Investment Adviser 100 Club of outperforming funds and providers, ranked in the top quartile of the IMA UK Equity Income sector on both one and three years but has slumped to the bottom quartile over one year, according to FE Analytics.