Activist fund Petrus starts proxy fight at German bank Aareal
London-based investor seeks to replace 3 members of real estate lender’s supervisory board
London-based activist hedge fund Petrus Advisers has launched a proxy fight at Germany’s Aareal Bank with the nomination of three executives to the real estate lender’s supervisory board.
Petrus owns just under 10 per cent of Aareal and has been critical of the bank’s “excessive and unethical” levels of pay and its return on equity. It has written to Aareal’s management board to nominate Heinz Laber, Marion Khüny and Thomas Hürlimann as replacements for three members of the supervisory board.
“Immediate, joint and prudent strategic action is necessary to ensure the sustainable success of the group for the future,” wrote Petrus in its letter, which was seen by the Financial Times. It was emailed to the company on Monday night and delivered by hand on Tuesday.
“The management board and the supervisory board, in particular the chair of the supervisory board Ms [Marija] Korsch, have failed in this regard.”
The letter sets the stage for a battle at the bank’s annual general meeting on May 18. Activists have often found it hard to agitate for corporate change in Germany, although in February Siemens boss Joe Kaeser praised activists and said company managements would be “well advised to listen to them”. Among Aareal’s shareholders is Swiss activist Teleios Capital, which owns more than 5 per cent of the bank.
Wiesbaden-based Aareal, which has a market capitalisation of about €1.4bn, lends to investors such as institutions and private equity firms purchasing commercial property, including offices, hotels and shopping centres. It recorded a €75m operating loss last year during the coronavirus crisis, having made a €248m profit the previous year. It said it expected to record profits “in a triple-digit million-euro range” in 2021.
Petrus, which has held a position in Aareal for two years, has called on the bank to spin off its 70 per cent stake in consultancy and IT subsidiary Aareon to shareholders by the end of this year, and to develop new sources of revenue.
In February, it criticised the bank’s “palatial headquarters and pensions” and the lack of clarity over the future leadership of Aareal after the bank said in November that chief executive Hermann Merkens would step down for three to four months due to ill health.
Petrus then wrote to the bank’s supervisory board at the end of last month to say that Aareal’s management “is neither willing to nor capable of designing and implementing urgently needed strategic measures” and called for the chair and two other members of the supervisory board to stand down in favour of its own candidates.
But Aareal last week rejected Petrus’s move, saying it was “without any substance” and added that the bank had already made changes to the supervisory board ahead of last year’s AGM.
Aareal said on Tuesday it had received Petrus’s letter and was checking it from a legal perspective. It referred back to its statement last week.
The bank’s share price was hit hard during last year’s coronavirus-driven market turmoil, although the shares have since recovered some of their losses. Over the past three years they have dropped from around €40 to less than €25.
Petrus, which manages about $700m in assets, has agitated for change at companies including Ophir Energy and Flughafen Wien, and last year squeezed a 14 per cent premium from Commerzbank in its purchase of Petrus’s stake in Comdirect.
There were 57 new campaigns launched globally in the fourth quarter, up 128 per cent on the third quarter, according to Lazard. The “Covid pause is over” for activists, the investment bank said in its latest report