Corporate stragglers of Europe, beware. The $6.8-billion sale of Dutch courier TNT Express to US rival UPS is a good result for activist investors. The $2-billion buyout of British software firm Misys would be another. After a lean patch, these victories will embolden troublemakers.
To be sure, both takeovers cap years of agitating and corporate re-engineering. It’s also not straightforward to work out the financial returns. But, the sales are notable as activist investors’ ideas don’t always get a full in Europe.
With TNT, US activist Jana Partners and Canadian partner Alberta Investment Management Corp first disclosed a stake of slightly more than five per cent in December 2009. Their arrival helped spark last year’s demerger of TNT from PostNL, a domestic mail firm, kick-starting a process that led ultimately to UPS’ sweetened takeover offer.
It’s taken even longer for ValueAct, the biggest shareholder in Misys. Some achievement came with the 2010 sale of Misys’ US medical software business. Now, the remaining business, focused on financial software, is under a recommended offer from US private-equity firm Vista Equity Partners. If the deal is sealed, it would be a welcome outcome for outside investors after a period of bid talk that included an all-share merger proposal from Switzerland’s Temenos, and ValueAct itself mooting the idea of a counter-bid with buyout giant CVC.
With the information available, it’s hard to calculate the precise returns. Monday’s upbeat announcements also contrast with other activism that has had less success, such as Elliott Advisors’ spats with Swiss drugmaker Actelion and Britain’s National Express. But, ValueAct’s track record shows the strategy can be lucrative. From its beginning in late 2000 to June 2011, it has returned an annualised 17.7 per cent, according to data from the state of New Jersey, a prospective investor.
Bankers say they are warning corporate clients across Europe about a potential pickup in activism. As ever, they probably have at least one eye on drumming up new business but takeover talk, real or imagined, also keeps corporate chieftains at the top of their game. Some other stake-building is already happening: look at Britain’s Cookson, where Cevian is now the biggest shareholder. Boards need to watch their step.
