High Court hedge fund ruling could cost F&C over £12m
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The High Court has ruled that F&C must buy out the minority interests of a former fund of hedge fund business in a move that will cost the firm over £12m.
The High Court judgment was announced today and is likely to mean F&C paying around £7.8m to buy out the 40 per cent share of the business owned by two founder member, plus legal costs of around £4.5m.
The statement from F&C says that the individual founders may argue that the price of the buyout may exceed £7.8m but the board has argued that this argument is unlikely to succeed.
The ruling centres around the limited liability partnership which was set up by F&C in 2004 with Francois Barthelemy and Anthony Culligan. F&C was contesting the fact that the two hedge fund managers were right to put in place a number of put options last year.
The founding partners argue that F&C wanted to close the LLP, which it owns 60 per cent of, in 2008, only to discover that the individual founder members, who own 20 per cent each, sought an order that F&C Alternative Investment Holdings buy out their minority interest, either at the put option price based on hypothetical profits, or at a price determined by the Court under section 996 of the Companies Act 2006.
The High Court has deemed that the put options were validly exercised by the founder members and that their interests had been unfairly prejudiced with the result that F&C AIH will have to buy out the relevant interests.
F&C’s board has been advised that the liability is likely to be around the £7.8m exercise price under the put options plus what it says is the “significant founder member’ total legal costs” which it says will not exceed £4.5m. F&C has also incurred £1.7m of associated legal and related expenses. F&C has held a £2.4m provision in relation to this matter since 2009.
The costs are set to be decided at a separate hearing. F&C says it will make a further announcement in the future.
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