By Juliet Samuel
American activist investors are taking another charge at Europe,
a market that has been notably unkind to U.S. funds that campaign
for change at large corporations.
There has been a resurgence of activity this year from funds
trying to force through changes at publicly traded companies in
Europe. There were 22 such campaigns in the first quarter,
according to data provider Activist Insight. There were 39 in all
of 2014.
Six of the instigators this year are U.S.-based--a relatively
large number. Among them: New York-based P. Schoenfeld Asset
Management, which forced French media conglomerate Vivendi SA to
increase a special dividend after an asset sale, and Elliott
Management Co., which is taking on Alliance Trust, a 126-year-old
U.K. investment company.
For many U.S. funds, the appeal of Europe may be that it is less
crowded than the U.S., where the number of activist campaigns is on
the rise--there were 264 campaigns last year, up from 208 in 2013,
according to Activist Insight.
Still, despite the recent uptick, the American activist
method--accumulate a stake in a company, then noisily demand
change--has long proved hard to pull off in Europe.
Elliott-- whose spat with Alliance Trust looks set to go to a
shareholder vote April 29--previously suffered a defeat in a
similar shareholder vote at Swiss biotechnology company group
Actelion Ltd. Elliott also compromised in a battle with U.K. coach
and train operator National Express Group in 2011.
New York-based activist William Ackman, on a recent visit to
London, said he had eyed an investment in struggling supermarket
Tesco PLC at the end of last year but decided it wasn't cheap
enough given the risks. He said that activism in Europe is thwarted
by a "club" atmosphere and that "it does require someone from
outside the system to make the change."
Some investors say activism hasn't previously taken off in
Europe partly because laws in some European countries give
shareholders a bigger voice than they would have in the U.S.,
making activism less necessary. For example, certain strategies
that American boards might use to retain control and fend off a
takeover, like a poison pill that can block building large stakes,
are forbidden in the U.K.
Stronger shareholder rights in Europe mean that they are more
likely to talk to company management privately when they have a
problem, says Robert Adams, a partner at law firm Baker
McKenzie.
"In Europe, you don't have to shout to get anywhere," said Steve
Brown, chief executive of GO Investment Partners, a European
activist fund. "We approach companies and boards privately with a
view to changing strategy."
Some American investors are pushing for changes that would bring
some European-like approaches to the U.S., including a drive this
year to allow investors to more easily nominate directors. Many of
the strongest defenses companies in the U.S. rely on, such as
staggered board terms, have been whittled down through years of
pressure, though some argue such changes actually opened the door
to more aggressive activism in the U.S.
Anne Sheehan, head of corporate governance at the $190 billion
California State Teachers' Retirement System, said U.S. investors
should be able to more easily nominate new candidates to be
directors and have an annual vote on their re-election.
So far, no American fund has achieved a major shake-up at one of
Europe's largest listed companies or national champions. Making
that breakthrough requires discussions with governments, unions,
regulators and management as well as investors, said Eric Knight,
chief executive of Knight Vinke Asset Management, a European
activist fund.
"[Large] companies in Europe aren't simply beholden to
shareholder's wishes. You may have a large block of stock but that
doesn't give you the legitimacy to shake up the company," he
said.
Not everyone agrees that a U.S. approach doesn't work in Europe.
Guy Wyser-Pratte, a French-born New Yorker and former U.S. Marine
who runs a $250 million activist fund, says U.S. funds shouldn't
tone down their tough tactics in Europe.
Aggression is needed to get company management to the table,
said Mr. Wyser-Pratte, whose fund has operated in Europe since
1994. "They know I'm not a wuss, OK? If I go after something, I'm
like a moray eel. I will put my teeth into their heel and not let
go."
In recent years, British shareholders have shown some appetite
for going public with their concerns, issuing public rebukes to
management teams either by talking to the press or rebelling in
annual investor votes. In one high-profile case, shareholders, led
by traditional long-only funds rather than activists, successfully
prevented a GBP144 million payout to the managers of Xstrata, a
mining company, for merging with its rival Glencore.
For the most part, however, it pays to be polite in Europe, said
Mr. Brown. And although he acknowledges that some Americans might
think his strategy is "a bit wet", he argues that it works better
than bluster.
Laurence Fletcher in London contributed to this article.
Write to Juliet Samuel at juliet.samuel@wsj.com
Access Investor Kit for Vivendi SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FR0000127771
Access Investor Kit for Alliance Trust Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B11V7W98
Access Investor Kit for Vivendi SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US92852T2015
Subscribe to WSJ: http://online.wsj.com?mod=djnwires