Activist Investor Takes Major Stake in Barclays -- Update
March 19 2018 - 12:55PM
Dow Jones News
By Margot Patrick
Barclays PLC came under further pressure to step up its
turnaround plans on Monday after activist investor Sherborne
Investors said it has taken a 5.2% stake in the bank.
Sherborne, founded by investor Edward Bramson, hasn't said if it
will seek changes at the British bank, whose share price has lagged
rivals in part because of questions about its business combining
investment banking, credit cards and retail and commercial banking.
In previous investments in the U.K.'s F&C Asset Management PLC
and Electra Private Equity PLC, Sherborne successfully pushed for
strategic changes and took board seats.
The entry of the activist comes at a sticky time for Barclays,
more than two years into a restructuring that has yet to pay off.
Barclays was one of the worst-performing European bank stocks in
2017 and some shareholders have questioned whether Chief Executive
Jes Staley has got the right strategy. In February, Mr. Staley said
his turnaround plan was about to pay off and that the return of
volatility to markets was helping boost trading revenue at
Barclays's investment bank.
Mr. Staley also pledged to double the bank's dividend, helping
lift the stock 4.5% between the Feb. 21 announcement and Friday.
The shares rose another 4% Monday on news of the Sherborne
stake.
Sherborne's stake building started late last year and is a
relatively rare example of an activist investor targeting a bank.
The sector scares off many activists since regulators have a much
greater say over business plans and capital levels than in other
industries.
Even so, in 2017, Swiss hedge fund RBR Capital Advisors AG took
a crack at getting Credit Suisse Group AG to break up--with no
success so far--while earlier attempts by Monaco-based Knight Vinke
Asset Management to bring about changes at HSBC Holdings PLC and
UBS Group AG largely failed. A 2007 effort by London hedge fund TCI
Fund Management to get ABN Amro to shed operations was a relative
success, but led to the disastrous acquisition of the Dutch bank by
Royal Bank of Scotland Group PLC and two other banks.
People familiar with the matter said Barclays and Sherborne
officials met after the bank's February full-year results, but that
there hasn't been any contact yet with the Barclays board. The
people said Sherborne hasn't indicated any specific changes it
might seek. Over the course of an investment, Sherborne typically
aims to make at least double its initial investment--GBP1.8 billion
($2.5 billion) in the case of Barclays.
On Monday, Barclays said it would "continue to engage with
Sherborne" but didn't give any details. Any activist action toward
the bank would add to a host a pressures: In addition to
restructuring, Barclays is defending itself against U.K. criminal
charges over a 2008 emergency fundraising from Middle Eastern
investors and is legally separating its retail and investment banks
to meet new ringfencing rules. The bank is also waiting to hear if
any action will be taken by U.K. regulators over attempts by Mr.
Staley in 2017 to identify a whistleblower who sent letters
criticizing an executive he hired.
During its three-year investment in F&C, Sherborne pressured
the company to reduce its debt and refocus its strategy. When the
company resisted, it rallied other shareholders and installed Mr.
Bramson as chairman. Sherborne had doubled its money by the time it
cashed out in 2013.
Sherborne hasn't always forced changes on targets, though. In
2013 it invested in private-equity firm 3i Group PLC, then cashed
out later that year at a double-digit profit saying it saw better
opportunities elsewhere.
In Barclays, Sherborne made around one-third of the GBP1.8
billion stock-and-derivative investment through a company it listed
in Guernsey in July. The Guernsey company's stated aim was to find
a single corporate target to invest in and make "a significant
capital return."
It started building the Barclays stake in 2017, the people
familiar with the matter said. At the February meeting, Barclays
met Sherborne as one of its top-five shareholders. At the time, it
was just below the 5% stake that triggered the disclosure Monday
under U.K. listing rules.
Write to Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
March 19, 2018 12:40 ET (16:40 GMT)
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