POSSIBLE ACTIVIST TARGETS
THOUGH IT might be tough for an activist shareholder initiative to find enough opportunities to carve a viable investment niche, IM would offer the following as candidates for a shake-up:
TRENCOR*: The company’s main asset is a major stake in California-based and New York Stock Exchange-listed container management group Textainer. So is there really a need for Trencor to carry the cost of a full board of directors … or indeed exist as a holding company if there is a way to unbundle the Textainer shares?
HOWDEN: The share price of this specialised industrial services counter has drifted after a decision to hold back dividend payments in lieu of clinching an empowerment deal. This all sounds perfectly reasonable except for the fact that Howden is awash with cash and that substantial cash is still flowing to its US-based parent via fees. It’s heartening to see a boutique asset management company — led by the respected Anthony Sedgwick — openly confronting Howden. That effort will ultimately garner dividend flows and bolster market ratings of the company. Sedgwick does, though, mull ominously whether developments are not “part of a strategy to undermine the clear attraction of the business, drive the share price as low as possible and then make an offer to battle-weary minority shareholders, which they would be happy to accept”.
DAWN: This diversified building supplies specialist has already riled shareholders for offering to buy back the shares owned by its empowerment partners at a huge premium to the market price. With the specific share buy-back proposals seemingly off the table, activist shareholders could now push for a buy-back of Dawn shares at current prices. Perhaps there’s also scope to urge directors to hone the “scattered” operational focus by selling off noncore or more marginal assets?
ACCENTUATE: This flooring specialist has not only been a serial underperformer, but has also seen its acquisition strategy go awry. That’s why a consortium of dissenting shareholders has shown its dissatisfaction by blocking the passing of certain special resolutions in the past five years. The share trades well below intrinsic net asset value (NAV) and minority shareholders — in spite of legal setbacks — are not likely to let executives forget how much value can be unlocked by a slicker operational performance.
REX TRUEFORM: This small fashion retailer is controlled by the Shub family by virtue of an archaic pyramid holding company structure and lowvoting N-shares. A disconnect operationally between Rextru and its larger listed rivals has increased pressure on the family to enhance returns. There might be a chance to unlock a chunk of NAV by selling off valuable properties, or dress up the fashion offering by taking corporate action to add new retail elements.
ARGENT: On paper, this industrial conglomerate offers huge upside potential against its last stated tangible NAV. The hitch is that operationally things are sputtering along, and management appears to differ vastly from asset managers on the best way to unlock this enormous value.