Credit Suisse Targeted for Breakup by Little Hedge Fund With Big Plans
October 17 2017 - 8:33AM
Dow Jones News
By Brian Blackstone and Laurence Fletcher
A small but top-performing activist hedge fund has set its
sights on an ambitious target: breaking up Swiss banking behemoth
Credit Suisse Group AG.
RBR Capital Advisors AG, which is based close to Lake Zurich and
headed by outspoken trader Rudolf Bohli, said Tuesday it wanted the
bank to split into an investment bank, a wealth manager and an
asset manager.
The fund will release further details of its plan this week. It
owns about 75 million francs ($77 million) in CS stock, or about a
0.2% stake, according to a person close to the bank.
"It's going to be better off being a pure player," William
Raynar, a board member at RBR, told The Wall Street Journal. It has
become "extremely difficult" for the investment bank to be
competitive.
He added that RBR has had "a number of interactions" with other
investors. Activists typically encourage other shareholders to
support their campaigns, to add heft to their calls for change.
Engineering the type of sweeping changes outlined by RBR is
likely to prove difficult. Credit Suisse's units are
interconnected. Each brings business to the other and the bank's
broadly diversified shareholder base may make it difficult to
generate momentum for changes.
"Every few years this idea comes around," said Andreas Venditti,
senior bank analyst at Vontobel, who examined two years ago whether
it made sense to split up Credit Suisse and separate its investment
banking unit.
"I came to the conclusion it is not viable," he said. Spinning
off investment banking "just isn't going to work, you have funding
and capital issues and these units work together with the
investment bank bringing money to the private bank" and the private
bank bringing flows to the investment bank, Mr. Venditti said.
CS shares rose as much as 2% early Tuesday before paring some
gains.
"While we welcome the views of all our shareholders, our focus
is on the implementation of our strategy and of our three-year
plan, which is well on track and which we believe will unlock
considerable value for our clients and shareholders," a Credit
Suisse spokesman said.
Before the credit crisis, activist hedge funds could often
effect major change at companies--notably, TCI helped trigger the
sale of Dutch bank ABN Amro. However, many funds saw their
influence decline during the crisis as investors pulled assets and
nowadays activists tend to need a much bigger stake in a company to
bring about change.
U.S. activists have been drawn to opportunities in Europe in
recent years, including billionaire activist investor Daniel Loeb's
Third Point LLC's announcement in June that it had taken a $3.5
billion stake in Nestlé SA. European activists have been gaining
influence in recent years, although they tend to be fewer in number
and often smaller than their U.S. counterparts.
RBR has had success in an activist campaign at airline catering
firm Gategroup Holding AG between late 2014 and 2016, during which
time the firm's shares rose sharply. However, it failed with plans
this year to shake up the board of Swiss money manager GAM
Holding.
News of RBR's Credit Suisse campaign was first reported by the
Financial Times.
Credit Suisse is two years into an overhaul under chief
executive Tidjane Thiam, who took the reins in 2015, as the Swiss
banking giant reorients away from profitable, but volatile,
investment banking toward the more stable business of managing
money for well-heeled clients.
This process has been rocky and exposed internal divisions. The
low point came one year into Mr. Thiam's tenure in July 2016, when
Credit Suisse shares dipped below 10 francs a share. The stock has
recovered to nearly 16 francs a share, well below the level around
25 francs when Mr. Thiam took the helm.
Credit Suisse lost 2.4 billion francs last year, mostly due to a
legal settlement with the U.S. over crisis-era mortgage-backed
securities. Still, its financial position was strong enough in the
spring for the bank to shelve plans to sell a chunk of its
profitable Swiss unit and raise capital by listing additional
shares instead.
RBR is the latest activist investor to target a well-known Swiss
company. U.S. investors David Winter, David Millstone and Keith
Meister have accumulated over 15% of Swiss chemicals company
Clariant AG through their vehicle White Tale Holdings and have
threatened to vote against Clariant's proposed merger with Huntsman
Corp., saying the deal is detrimental to investors.
After Third Point LLC took its stake in Nestlé it began pressing
for changes, including the sale of non-core assets such as Nestlé's
stake in L'Oréal. Days later, Nestlé announced a 20 billion Swiss
franc share buyback program and said it would orient its capital
spending toward high-growth parts of its business, including pet
care, infant nutrition, coffee and bottled water.
Write to Brian Blackstone at brian.blackstone@wsj.com and
Laurence Fletcher at laurence.fletcher@wsj.com
(END) Dow Jones Newswires
October 17, 2017 08:18 ET (12:18 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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