Opinion 

When investment activists rattle the cage

James Sullivan

James Sullivan

In 2002, Laxey Partners, a London based activist investor, launched an offensive against British Land (BLND) in order to unlock and realise value for shareholders

More recently, readers will also recall an attempt by the same investment house to extricate value from Alliance Trust.
At that time, BLND shares were trading on a discount to net asset value of around 40 per cent.

The methods used by Laxey in their attempt to vote through resolutions to break up the company were within the rules, but according to British Land, they fell outside the spirt of the law - Laxey had borrowed the vast majority of BLND shares that they used to vote (41.7m of the 46.6m shares they represented).

Nonetheless, Laxey heavily criticised the corporate governance of the company and sought them to buy back up to 10 per cent of their shares, stating: ‘By not offering to buy back shares at a time when the share price is trading at a significant discount to net asset value per share, the company is not acting in the best interests of its shareholders.’

Laxey did not explicitly succeed in their attempts to put the squeeze on the company, but did indirectly lead to BLND adopting major changes. 

The company bought back 350,000 shares later that year (the first time in 10 years) and announced the separation of the chairman and chief executive roles.

It may appear that the noise created by Laxey was enough to put heat under BLND. Laxey subsequently ‘sold’ their shares and moved on.

In July of this year, and with the company once again trading on a very material discount to its net asset value, BLND announced once again they would be buying back £300m worth of shares in the company (coincidentally, again the first time in 10 years).

This time the announcement was made without the loud petitioning from disgruntled shareholders. A proactive move by the company in recognising the value in its own shares.

And it’s not just BLND. In July, Land Securities also returned capital to shareholders following their disposal of the ‘Walkie Talkie’ building.  

Perhaps the unsuccessful revolt by Laxey 15 years ago remains fresh in the memory of the industry, and therefore whether one agrees or disagrees with activist investing, it does help oil the wheels of the market, and plays a role in keeping companies on their toes.  

With the likes of activist investor Ed Bramson and his £700m Sherborne vehicle lurking in the shadows, it is perhaps no surprise the REIT industry is on the front foot at a point of potential vulnerability.

One doesn’t have to be aggressively bullish on the future of UK property to find value in the likes of British Land. There is a possible arbitrage to be had between perception and reality, while being the recipient of a near 5 per cent dividend.

If the company nor the market doesn’t unlock the value, then it won’t be long before activist investors rattle cages once more.

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