Rebels stirring up a storm
BRITAIN’S big institutional investors have left a vacuum in shareholder activism, which is increasingly exploited by our American cousins. In the last year or so we have seen US activists bust their way on to the board of Rolls-Royce, seize control of venerated Aberdeen Asset Management and take charge of venture capital fund Electra.
In the latest tussle, the hedge fund Elliott has bullied its way into contention for the hand of high street discount store Poundland and Toscafund is beating up on the board of Speedy Hire.
It doesn’t speak well of our own dozy big battalion investors that they fear to tread where others will. It took an excoriating report from the House of Commons on Sports Direct and disclosure of an alleged sweetheart deal with a Mike Ashley family member to arouse the all but anonymous Investor Forum into demanding changes on the retailer’s board.
Elliott Partners is an interesting case in point. The firm, the brainchild of Paul ‘Elliott’ Singer, is perhaps best known for its ruthless bets on Argentine debt. It had to wait for more than a decade for the profits to come rolling in, but when they did, it was in the hundreds of millions of dollars.
Aberdeen was not quite in this league but since it staged its coup, discarding chief executive Katherine Garrett-Cox, there has been a notable improvement in performance.
Elliott’s latest intervention is at Poundland, which had looked to be heading into the ownership of South Africa’s Steinhoff, the owner of Bensons for Beds and Harveys.
The Poundland board, having agreed to a £610m takeover by Steinhoff on August 11, finds Elliott on its register holding a 24.9pc stake. As always with Elliott, no-one can be quite sure what it is up to. But if Elliott’s goal is drive up the bid price it may find it has a problem, because Steinhoff’s offer is final and it would need some kind of derogation from the Takeover Panel for it to raise the offer.
Alternatively, Elliott could simply take profits on its stake and run, or make its own offer. All of this will leave Steinhoff, which earlier this year failed to net Home Retail Group and then Darty, a little perplexed as it plots its exit from South Africa. Even more juicy is what is happening at Speedy Hire. The largest shareholder Toscafund is upset at the company’s decision to drop plans to take over rival HSS and has launched blistering attacks on executive chairman Jan Astrand.
It wants to depose the chairman and supplant him with its own choice David Shearer, who Tosca claims is a fine upstanding independent figure. Speedy Hire says he is no more than a Toscafund placeman.
Tosca accuses Astrand of lacking the ‘appropriate record and attitude’ and wants to turf him out at an special general meeting convened for September 9. The guns at dawn will require Aberforth Partners, Schroders and some of the other fund managers to come down off the fence and become involved.
In all these cases it is a bit shaming that it requires the intervention of politicians and an assortment of hedge funds and rogue investors to spur supine big battalion shareholders into some kind of decision-making.
Toxic times
IF Barclays’ reinvigorated board had hoped that the Serious Fraud Office investigation into emergency Middle East fund raising in October 2008 might be quietly dropped, they will be disappointed.
New documents submitted to the High Court in a prominent lawsuit brought by City fixer Amanda Staveley suggest that Barclays effectively bought its own shares by lending Qatar the funds to buy £2.3bn of new stock. The allegation means that former Barclays bosses John Varley and Bob Diamond still have important questions to answer.
The former Barclays chiefs have form when it comes to such circular transactions. As part of the effort to shift toxic assets off the balance sheet in September 2009, Barclays embarked on the Protium deal – selling a package of £7.6bn of assets to a bunch of Barclays traders, lending them the money to do the transaction and paying them a performance fee for good measure.
Such intra-company transactions are generally frowned upon.
Regulatory concerns about Protium were among the factors which led to then Bank of England governor Mervyn King helping to show Diamond the door. Varley and Diamond may have been successful in keeping the government at bay, but a pernicious legacy lives on.
Open skies
THE great ice-breaker for international relations in the 1970s was ping-pong. Nearly half a century on there is a new lingua franca of the skies.
British Airways has renewed flights to Iran after a break of several years. Even more epoch- making, the US carrier JetBlue launched flight 387 to Cuba from Fort Lauderdale, the first scheduled service for five decades.
Next stop North Korea…