Shareholders Who Scare the #@*%! out of Companies
Lanchner, David, McTigue, Guthrie, Global Finance
Obstreperous investors have been telling US managers how to run their comapnies for years. Now it's Europe's turn.
When Union Bank of Switzerland agreed in December to a $25 billion merger with Swiss Bank, it was sweet vindication for Martin Ebner, the scourge of Swiss boardrooms. Ebner, through investment funds run by his BZ Bank in Zurich, was UBS's biggest stockholder, and he battled UBS management for five years over the bank's poor returns and disregard of shareholders.
Coming on the heels of Ebner's success last August at pushing Swiss insurer Winterthur into the arms of Credit Suisse, the UBS/Swiss Bank merger looks like a watershed in the history of rebellious stockholders-a dramatic sign that hostile minority investors are starting to get their way in the most hidebound of European markets. That's inspiring other corporate predators and rebel shareholders to redouble their efforts in Europe.
And it's encouraging veteran US activists such as the California Public Employees' Retirement System (Calpers), which until now has tread gingerly outside the United States, to become more assertive abroad. Last year Calpers established corporate-governance principles for Britain, France, Germany, and Japan. In December it decided to give $200 million to two of Britain's most hell-raising portfolio managers, Iulian Tre er and Brian Myerson of UK Value Fund.
In short, non-US companies must start learning to cope with the kinds of roughand-tumble stockholders that US companies have contended with for decades. A slew of new players are already emerging, especially in Europe. Some are Americans, such as New York's Guy Wyser-Pratte and Asher Edelman, who have a long history of driving US corporate managements nuts and who are now transporting their tactics abroad.
Many others are home grown, such as Sweden's Sven Hagstromer and Mats Qviberg, or Britain's Christopher Mills, Julian Treger, and Colin McLean. Some are international hybrids, such as James Mellon of Regent Pacific Group, a Briton with US experience at GT Capital who set up shop in Hongkong, plunged into Russiaand was recently embroiled in the breakup of British investment bank Hambros. Or Templeton's renowned Mark Mobius, who keeps getting into fierce struggles with managements in the most obscure emerging market countries. And in some battles they have been known to gang together to leverage their clout.
All of them might, in their nicer moments, like to see themselves as international versions of Warren Buffett, a shareholder whose solid business sense US corporate managers like to tap, or at least akin to the LENS funds' Robert Monks and Nell Minow, who are graceful yet persistent in the way they badger companies. But mostly the new breed models itself after such piratical operators as Henry Kravis, the king of US leveraged buyouts, or Michael Price of Franklin Mutual Advisors, the balance sheet analyst and workout whiz most notorious for forcing Chase Manhattan Bank to merge into Chemical Banking.
In the simplest terms, the new activists fall into two camps, those who like to work privately with management, and those who turn their campaigns into public spectacles. In Germany, Christian Strenger, who runs Deutsche Bank's DWS, Germany's largest fund manager, is the quiet, behind-thescenes type. "Forcing changes in management would do nothing," says Strenger, who is gently pushing for full and equal takeover offers, an end to supervoting rights, and other such measures. "What works is talking to them and changing how they go about things."
In the higher-decibel camp is Ekkehard Wenger, a professor of finance at the University of Wurzburg, who bedevils such companies as Siemens and Allianz with lawsuits. "Strenger talks but does nothing. As the head of a Deutsche Bank subsidiary, he is not free to act independently of the influence of big business." Replies Strenger: "Wenger is loud, but he achieves so little. …