Rebel forces showdown at Johnston

REBEL shareholder TT Electronics has stepped up its campaign to break up Johnston Group, the aggregates-to-fire engines company, with a hard-hitting letter to fellow-investors this weekend.

TT chairman John Newman is trying to rally support for a showdown with the Johnston family, which controls the business with 50.2% of the shares, at an extraordinary general meeting next week.

Newman wants Johnston, whose businesses include Saxon fire engines, roadsweepers and quarry and concrete pipe operations, to sell its construction materials businesses and return 100p cash per share to investors.

He thinks there are willing buyers for them, and the sales could raise more than Johnston's current stock market value of £37m.

In the letter, Newman reminds investors that electronic components group TT, which has a 23% stake in Johnston, offered to buy shares at 500p six years ago. They closed last week at 340p. 'We are all concerned about the underperformance of the Johnston Group and the board of Johnston Group's inability to deliver shareholder value,' he adds.

TT also has the backing of fellow shareholders Merrill Lynch and American fund manager Tweedy Browne, which means the rebel camp holds 31% of the shares. The Johnston board has said it would consider any offers for its businesses, but it has recommended shareholders to reject TT's proposals and says the founding family would vote against.

But Newman says in his letter that by including the family's intention with its response, the board raised concerns about its impartiality. He said: 'This is a serious proposal that should be considered by the independent non-executive directors. Their response raises corporate governance issues.'