CorpGov: Lesser-Known U.S. Funds Join the European Action
Europe is facing not only well-known U.S. activists such as Nelson Peltz and Dan Loeb but smaller American insurgents who are making waves.
That’s the view of Simon Lyons, a partner at PJT Partners Inc. and panelist at The Deal’s Corporate Governance London conference.
“In Europe, you have the classic brand-name U.S. hedge [fund managers], such as Dan Loeb and Nelson Peltz and others. Then you have these funds you’ve never heard of suddenly make a big noise in your stock.”
For example, Lyons said, Coast Capital Management LP a U.S. fund, is targeting U.K. transportation company FirstGroup plc and is “causing all sorts of changes to happen in that company.”
Coast Capital had launched a director contest and was agitating for M&A at FirstGroup for several months. The target in December said it is exploring a sale of its yellow school bus and transit businesses in the U.S., which together with a smaller Greyhound bus division represent about 75% of the company’s earnings.
The insurgent investor’s chief investment officer, James Rasteh, in December told The Deal he is keeping a close eye on FirstGroup as it begins the strategic review for its U.S. school bus and transit business.
In addition, other less well-known U.S. activists have begun to target European firms, such as Connecticut-based Cat Rock Capital LP’s Alex Captain, who pushed successfully for a combination between food ordering platforms Just Eat plc of the U.K. and Takeaway.com NV of the Netherlands. Captain was opposed to an ultimately unsuccessful gatecrashing bid for Just Eat by Prosus NV.
“There is so much money following this strategy that I think we’ll be seeing more and more of it,” Lyons said.
Lyons also discussed an ultimately unsuccessful effort by U.S. headquartered Oaktree Capital Management LP and two hedge fund allies to drive a bump in the price offered by a consortium of private equity managers seeking to buy satellite operator Inmarsat plc. The activist funds pulled back from a courtroom challenge at the last moment.
“We had an extraordinary situation last year advising Inmarsat’s sale to a PE consortium,” Lyons said. “A trio of hedge funds, some of which we knew about, some of which we have never heard of before, tried to change the way M&A was done in the U.K. by having a substantial court process decide if this transaction could go through. They appointed counsel, they filed evidence; it was an extraordinary departure from what was normal in the U.K. We thought the case for blocking the transaction was not that strong. The night before the core meeting, the acquiring consortium said their offer was best and final and wouldn’t be changed, and immediately these funds dropped their opposition to the transaction.”
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