Barclays makes case for why shareholders should rebuff activist
Bank chairman warns against move by Edward Bramson to seek a board seat
Barclays, the UK bank under attack from activist investor Edward Bramson, published its most detailed explanation of why it thinks investors should vote against his attempt to force his way on to the board at the lender’s annual meeting.
In a notice sent to investors ahead of its annual meeting in May, John McFarlane, Barclays’ chairman, warned the bank’s directors that he believed Mr Bramson’s “presence on the board would be detrimental to the company and shareholders as a whole”.
Mr McFarlane predicted that if Mr Bramson’s effort to win a directorship were successful he would attempt to significantly scale back Barclays’ investment bank, forcing the lender into a “prolonged round of review and/or restructuring at a time when focus should remain on successful execution”.
He also claimed that Mr Bramson’s interests were not aligned with shareholders because his position was “leveraged . . . and subject to a time-limited derivative instruments to hedge against downside risk”.
Last month, the Financial Times reported that Mr Bramson had funded the majority of his stake with a $1.4bn loan from Bank of America under a complex arrangement known as a funded equity collar, which effectively limits the potential losses on the 5.5 per cent stake he holds via his Sherborne vehicle, while also capping potential returns.
“The board believes that this structure results in a shorter term focus . . . and, as a result, Mr. Bramson is incentivised to try and create near-term share price improvement at the potential expense of long-term sustainable shareholder value,” Mr McFarlane wrote.
Mr McFarlane also cast doubt on Mr Bramson’s record as an activist investor, pointing out that he had “overseen executive management departures and the sale of businesses and large reductions in employees”.
Given that Barclays had “already implemented similar measures during the course of its restructuring . . . further such initiatives would be counterproductive,” Mr McFarlane said.
“None of Sherborne’s previous investments involved a bank, let alone an organisation of the scale and complexity of Barclays,” Mr McFarlane added.