(Repeats story published late on Wednesday)
* Activist campaigns hit 9-mth high of 3.4 bln stg in Sept
* Sterling currency has fallen sharply since Brexit vote
* Weak pound makes UK assets attractive for foreign
By Maiya Keidan and Atul Prakash
LONDON, Oct 12 Activist investors who take
stakes in companies to push for major change are looking to
capitalise on a slide in sterling following the Brexit vote to
buy into British targets cheaply.
The amount of money invested by activist investors in
British companies hit a nine-month high of 3.4 billion pounds
($4.2 billion) in September, according to data from London-based
industry monitor Activist Insight.
That represents a 27 percent rise from June, when Britons
voted to leave the European Union, with most of the investment -
about 2 billion pounds - coming from abroad. Companies that
activists have bought into, and driven boardroom change, include
distribution and aviation group John Menzies and tool
rental firm Speedy Hire.
Sterling has fallen nearly 18 percent against the dollar and
about 15 percent versus the euro since the June 23 referendum,
helping investors whose funds are held in those foreign
currencies to buy into British firms for less.
The pound sank about 10 percent in a "flash crash" on Friday
and, while it recovered much of that, the Bank of England's
trade-weighted sterling index is near its lowest level on
"Pre-Brexit, we had about 10 percent of our assets in
British companies and post (Brexit vote) now we're about 30
percent," said David Neuhauser, managing director of U.S.-based
activist manager Livermore Partners, adding that the increased
investment was down to sterling's weakness.
"If you see us make more investments, I see more in the UK
than in the U.S."
He declined to say which companies Livermore had bought
into. But he said its activism strategy included seeking targets
where shareholder value could be boosted through a sale of the
group, or spin-offs or sell-offs of units, and that he saw
particular opportunities for this in Britain.
A continental European activist investor, with $2 billion in
assets, also told Reuters that sterling's fall had created
opportunities in British companies, which they sought to
"I was just computing the currency-adjusted earnings for
some of our potential targets ... the currency has depreciated
so we are looking at savings in the range of 15 percent on the
companies I've been looking at," said the investor, who declined
to be named as they did not want to reveal their positions.
The investor said they targeted companies where they saw a
simple and quick fix to problems, typically where long-term
shareholder returns lagged peers, management was focusing on a
bad division of the business, or where there was an inefficient
capital structure with too much cash or too little debt.
Investors can engage in activism for many reasons as they
look to boost the value of their shares, sometimes in the face
of resistance from the management of the company.
While some hedge funds and others are set up explicitly to
engage in such activity to drive up the target stock for profit,
long-term investors can decide to push for a change in strategy,
which can include pushing a company towards being taken over.
The Activist Insight data covers investors who identify
themselves as an activists and take stakes of over 5 percent -
which must be publicly disclosed. Non-UK activists increased
their aggregate investment by 30 percent since June to 1.98
billion pounds, according to the data, which did not identify
the investors or target companies involved.
Activism campaigns launched since the referendum include
German activist Shareholder Value Management's (SVM) push
against the board of John Menzies in July, when it announced it
had built up a 7 percent position.
SVM asked for John Menzies to split its businesses and hire
an independent chair. A new chair was appointed a few weeks
later. The activist continues to agitate for a split.
Bank of England policymaker Michael Saunders said on Tuesday
that he would not be surprised if sterling fell further, warning
a "bumpy" Brexit could sharply reduce British economic growth.
The declining currency has left some companies ripe for
activists looking to push boards to create shareholder value by
engaging in mergers and acquisitions.
Russ Mould, an investment director at stockbroker AJ Bell,
said there were many companies in Britain that could be
potential M&A targets, which he said often made such firms
attractive to activist investors.
"There are several FTSE 250 firms which have strong
competitive positions, decent balance sheets and global reach -
facets which may tempt a bidder," he said, citing industrial
software firm Aveva, precision instruments maker
Spectris and engineer Renishaw.
Aveva, Spectris and Renishaw all declined to comment.
One investor who has already benefited from M&A has been
U.S. activist hedge fund Elliott Associates, whose decision to
gradually buy stock in Premier Farnell since June was
rewarded by a bid from U.S. firm Avnet a month after the
vote. It started to unwind its 6.5 percent position in August.
Elliott declined to discuss the investment or its activism
'ONE WEEK, 5 PCT CHEAPER'
While the share prices of many big British companies have
been bolstered by sterling's weakness on account of their
overseas earnings, insulating them from the effects of Brexit
uncertainty, more domestically focused firms have fared worse.
The FTSE 250 mid-cap index has lagged the blue-chip FTSE 100
since the referendum, up 3.7 percent versus 11 percent, weighed
down by falls in the value of a number of its more
domestically-focused constituents, Thomson Reuters data shows.
This has meant that even British activist investors, whose
funds are in sterling, have at times managed to buy into
companies relatively cheaply because of their low valuations.
UK-based hedge fund Toscafund started buying into Speedy Hire
in July and has built up a stake of about 19 percent. It
launched a campaign in August seeking the chairman's resignation
and for the company to appoint a new director of its choosing.
It was partly successful; while investors voted to support
the chairman at the annual general meeting, Toscafund managed to
get its nominee elected to the board.
Toscafund did not respond to requests for comment.
UK-listed fund firm Crystal Amber, which manages 200
million pounds in assets, has made gains of 34 percent since
July 1, in part by buying up stock in commercial vehicle hire
firm Northgate and Restaurant Group in the three
days after the vote.
"We are very confident there are more opportunities
post-Brexit," said Richard Bernstein, investment adviser to
Crystal Amber. "There are a host of great British companies that
this week alone have become 5 percent cheaper."
($1 = 0.8033 pounds)
(Additional reporting by Vikram Subhedar; Editing by Pravin