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Telefónica activates its anti-opa defense due to the emergence of an activist fund - http://bit.ly/2UFLH5a
The company has investigated in recent weeks the intentions of Elliott Management, the 'hedge fund' that has managed to take control of the board of Telecom Italia
José María Álvarez-Pallete has alerted the board of directors of Telefónicaand its closest team to the intention of an international hedge fund to propose changes in management and capital. According to confirmed official sources of the operator, the first executive of the telecommunications group has ordered to track in recent weeks the taking of positions by Elliott Management Corp , the activist fund of tycoon Paul Singer that has caused the change of the CEO and of the strategy of Telecom Italia.
The same sources point out that the first information about the alleged interest of Elliot Management to take advantage of Telefónica's stock market crash came during the summer, when the price of the first telecommunications company in Spain lost seven euros per share. At that time, Pallete met in person with numerous institutional investors present in the capital of the company to know first hand the reason for the sharp decline in the stock market. In addition, he ordered the strengthening of the investor relations team to warn of potential short-term movements of vulture funds that were betting on the downside against the company.
After the concern of BBVA, the first shareholder of the teleco, the concern about the stock depreciation officially reached the board of directors in September , in which Pallete had to explain what had been the inheritance received from his predecessor, César Alierta, and the decisions he had adopted to value the group. After reassuring the governing body and getting them to close ranks, Pallete continued with the investigation into the possible interest of some activist fund for questioning the group's strategy and asking the management team for an explanation.
Web of Elliott Management Corporation.
Telefónica's investigation led to suspicions that Elliot Management Corp, the most aggressive activist fund in the market (it has just invested 1,000 million euros in the French group Pernod Ricard ), was exploring the alternatives to enter Telefónica's capital if it could get support. of other reference shareholders. According to the same sources, the hedge fund contacted former senior executives of the operator to obtain accurate information on the situation of the company, a move that put Pallete even more alert.
These exejecutivos have been Ramiro Sánchez de Lerín , who was general secretary of the council and knowledgeable of the great secrets of the house , and Santiago Fernández Valbuena, former head of corporate development who once bid to be named successor of Alierta. The Confidential has tried without success to know the version of Sánchez de Lerín, who left Telefónica last year with an indemnity of 11.35 million euros.
For his part, Fernández Valbuena, who also received a millionaire compensation for leaving the group, has assured that his current job is to manage his investment fund in Brazil, where he was CEO of the Spanish subsidiary, and EBN Banco , the small entity acquired from several savings banks. Asked insistently whether he has maintained contact or relationship with Elliot, he has responded that he does not want to "talk about that matter." For his part, Elliot's official sources have declined to comment on this information.
The tracking that has made the team of Pallete in recent weeks has not detected current take of participation of Elliot Management Corp, which manages about 30,000 million dollars. His last big conquest was Telecom Italia, of which he controls almost 9% of the capital and in which he has maintained a tough confrontation with his main shareholder, the French Vivendi. The last decision of the board of the Italian operator was the replacement of the CEO at the end of last November.
An acquaintance of Fainé
The hedge fund has also had an active position in The Bank of East Asia, the Chinese bank of which Criteria , the investment arm of La Caixa, is a leading shareholder (17.59% of the capital). Paul Singer proposed at the beginning of the year to the board of directors to sell the financial institution and accept an offer to buy, which was opposed by Isidre Fainé and the rest of the members of the governing body. Criteria and CaixaBank are currently benchmark shareholders of Telefonica, of which they jointly control 6.14% of the capital, so they know first-hand how Elliot, owner of the historic AC Milan football club, acts . Fainé is one of the great supporters of Pallete.
The president of the La Caixa Foundation, Isidre Fainé. (EFE)
Telefonica has accumulated a 4.7% drop in the stock market so far this year. But at the end of September came to register a decrease of 18% , when it fell to 6.78 euros, minimum in almost 20 years. The price has recovered 14.15% of its value in the heat of the good results of the third quarter and the improvement of the estimates for the whole year. However, shareholders have lost a third of their value in the last three years, period in which the dividend has been reduced by half.
The company announced last night the appointment of Eduardo Navarro as the new technical general secretary, a position of new responsibility that will cover matters related to legal, regulatory and communication areas. The appointment of Navarro, CEO of Telefónica Brasil, marks the departure as head of institutional relations for José Luis Gómez Navarro after two years in office. The man of confidence of Pallete will continue in the short term in the group in the department of special operations.
Chris Hohn and investor group step up $1.6bn Indian battle
Hedge fund boss part of group seeking to recover investments in property developer
Investors including hedge fund boss Christopher Hohn have called for the ousting of managers at an Indian property developer with links to US President Donald Trump, as they step up efforts to recover $1.6bn of investments.
Sir Christopher risks losing about $40m of his own money and roughly $140m from the charitable arm of his hedge fund on investments in Ireo, one of India’s biggest property developers, which has been accused of stealing vast amounts of assets.
The British hedge fund billionaire is part of a group of about 400 investors — including university endowments, wealthy individuals and other hedge funds — who accuse Ireo’s management of “siphoning” much of the $1.6bn it raised for its own benefit.
They have accused Ireo’s managing director Lalit Goyal of creating a web of companies to channel capital away from property projects via side-dealings with people close to the Indian property developer.
Mr Goyal told the Financial Times allegations against him were “all bullshit” and part of a “malicious campaign” to discredit him. He said: “This is a classic hedge fund strategy to take over the company from me and give it to somebody else.”
He added that there was no evidence of redirecting funds and no evidence in the statement of a “so-called whistleblower” that Ireo had received funds unlawfully. He also claimed accusations of manufacturing a web of companies for his benefit were a lie.
Allegations of fraud and mismanagement at Ireo come months after Abraaj, once the Middle East’s largest private equity group, collapsed following accusations that it used investors money to fund its own expenses.
Axon Capital, a US hedge fund, and Sir Christopher’s Children’s Investment Fund Foundation (CIFF), say that together they hold more than 20 per cent of Ireo funds and invested roughly $300m. With the support of more than 100 investors, Axon has filed legal proceedings in India to remove management and to block sales of assets to safeguard them while the company is being investigated.
A letter sent to investors by Axon, which is run by former Goldman Sachs trader Dinakar Singh, and CIFF said: “We are worried that Goyal [and] Ireo are intentionally creating damage and committing new frauds to cover old ones” by liquidating companies and hiding previous deals.
The letter, seen by the FT, added: “Faced with the prospect of wrongdoing uncovered, they have appeared to be almost intentionally trying to ‘scramble the egg’ and both create damage and shuffle and sell assets and initiate liquidations, to both hide past transactions and to steal money from the company while they can.
“Their behaviour has been disgraceful,” the letter said. “We have pleaded to the [Indian Supreme] Court that they should consider replacing/suspending Goyal and replacing him on an interim basis with an administrator (likely a retired judge).”
It added: “Obviously, we cannot predict what will happen, but based on the proceedings so far, our attorneys have significant hope that the Supreme Court will rule in our favour and potentially immediately suspend Goyal (and possibly even demand his passport be revoked and/or he be arrested).”
On top of the millions that these investors risk losing, they say that several billion more could be lost by homebuyers in the form of advance payments, according to the letter. “Sadly, many homebuyers have been devastated by paying for their homes up front, and subsequent failure of Ireo to deliver homes to these buyers, even after many years.”
Mr Goyal told the FT he rejected the allegations in the letter sent to investors. He added: “We have delivered millions of square feet to thousands of customers.”
Hundreds of blue-chip investors also face heavy losses on their investments in Ireo, including the endowments of Notre-Dame University and Stanford University, which stand to lose millions of dollars.
A person close to Sir Christopher, who earned $274m from his hedge fund TCI last year, said that while the potential loses are substantial, they only represent 2 per cent of total net assets of CIFF. His personal exposure of close to $40m to Ireo was detailed in his divorce proceedings in what became Britain’s biggest settlement at more than £337m.
Ireo has links with the US president after partnering with the Trump Organisation to build an office tower on the outskirts of New Delhi two years ago. At the time, Donald Trump Jr, the son of the US president, called Ireo “truly a fantastic group”.
Sir Christopher and Axon Capital declined to comment.
Trussardi closer to agreement with QuattroR over stake sale
Trussardi, the privately held Italian fashion house, is close to reaching an agreement with QuattroR, a turnaround fund controlled by state-owned Italian financial holding Cassa Depositi e Prestiti (CdP), over a stake sale, Italian-language daily Il Sole 24 Ore reported.
The unsourced report said that an announcement is expected in the next few days confirming the sale of an 80% stake in Trussardi to QuattroR via a capital increase of at least EUR 50m.
The article said that Trussardi posted turnover of EUR 154m in 2017.
Asian equities advanced alongside U.S. equity futures Thursday after a series of positive developments in U.S.-China trade talks buoyed global stocks. The British pound held its advance after U.K. Prime Minister Theresa May survived an attempt to oust her.
Gains accelerated from Japan to Australia, with Hong Kong and Chinese stocks outperforming. Futures on the S&P 500 rose as news broke that Chinese importers have bought U.S. soybeans. Earlier, the S&P 500 Index added to rallies in Europe and Asia, though the gains were pared in afternoon trading. The dollar nudged higher against peers and Treasuries were steady after overnight losses as data showed a key measure of U.S. inflation picked up as expected in November. The yen slipped amid the risk-on mood.
US After Hours TLRD -26.7%, LLNW -23.7%, OXM -10.9% following earnings/guidance
Nikkei +0.99% Hang Seng +1.20% CSI +1.53% Shanghai +1.23% Shenzen +1.09%
Eur$ 1.1370 CNH 6.8649 CNY 6.8694 JPY 113.45 GBP 1.2621 CHF 0.9936 RUB 66.3001 TRY 5.3544 WTI$ 51.32 +0.33%
S&P +0.44% EuroStoxx +0.07% Dax +0.09% SMI +0.19% FTSE -0.07%
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Pernod Ricard chief defends family firm from activist - https://on.ft.com/2S1Mo7r
US hedge fund Elliott is pushing for changes at the spirits maker
The chief executive of France’s Pernod Ricard rejected activist investor Elliott Management’s charge that the group is a perennial under-performer with weak margins, defending his family company as “a beautiful success story” focused on long-term value creation.
Alexandre Ricard, who has led the maker of Ballantine whisky and Absolut vodka for nearly four years, is bracing for a fight now that one of America’s most feared activist investors has amassed a stake of more than 2.5 per cent in Pernod Ricard.
Elliott disclosed the position on Wednesday, and called for cost cuts to narrow the operating margin gap of 5 percentage points between Pernod and larger rival Diageo. Closing that gap would equate to an approximately €450m boost to Pernod’s profit.
Pernod has already started cutting costs under an efficiency plan and will invest half of the savings back into the “priority brands”, said Mr Ricard in an exclusive interview with the Financial Times.
“We had made voluntary choices a year ago to over invest in key brands and markets. Now is not the time to reduce investment levels in India, China or the US,” said Mr Ricard.
“I have a plan which will deliver top-line growth and bottom-line performance, setting us up for sustainable and responsible value creation.”
The 46-year-old CEO is one of the grandsons of the founder Paul Ricard, who invented the eponymous anise-flavored spirit known as pastis in the 1930s in the French Riviera city of Marseille. The family built the company through acquisitions into an international player in spirits, second only to UK-based Diageo, which is roughly twice the size of Pernod’s market value of €39.5bn.
Since taking over, Mr Ricard has boosted Pernod’s growth, helped by buoyant prospects for the global spirits market as more Asian consumers develop a taste for high-end spirits. Organic sales growth was 6 per cent for the financial year to June 30, up from 3.7 per cent the year before, and 2 per cent two years ago.
Now the former Morgan Stanley banker and Accenture consultant will have to contend with having Elliott as his fifth-largest shareholder.
The two sides have met multiple times in recent weeks, and have so far kept their public statements cordial.
“We value every one of our shareholders’ input,” said Mr Ricard. “Elliott is a shareholder, and of course, we listen to what they have to say, although I can’t comment on the specifics of the discussions.”
Nevertheless, tensions may well build, especially if the two sides end up not being able to work together and things turns political.
The French government already issued a statement in support of Pernod and the family, saying it “wants big French companies to have stable and long-term shareholders . . . who are not subject to pressure from shareholders who want only short-term financial profitability”.
For its part, Elliot, which manages about $35bn, criticised Pernod’s governance and board for not having enough independent voices.
The fund said its analysis “further suggests that an environment of inadequate corporate governance and a lack of outside perspectives have contributed to this under-performance”.
Asked whether he would be willing to allow a representative of Elliott to join the board, Mr Ricard declined to comment. “That is not a question I want to answer at this stage.”
Elliott also wants Pernod Ricard’s board to be open to larger-scale mergers and acquisitions than the modest deals it had been doing in recent years, according to a person familiar with the situation. Analysts have long speculated that Pernod could team up with one of the other family-backed spirits companies such as Jack Daniel’s maker Brown-Forman Corp or Davide Campari Milano SpA.
Asked about his appetite for deals, Mr Ricard said Pernod would continue to “dynamically manage our portfolio” by buying promising new brands and selling off under-performing ones.
Asked whether the family would be open to selling the company, the executive said: “Pernod Ricard is a beautiful success story based on very strong family values. Over the last three years we have created more than €11bn of value and our shares are up 38 per cent, outperforming the CAC 40 and the sector. This is what I call a group committed to long-term value creation.”
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