Barclays Finds Itself in Crosshairs -- WSJ
March 20 2018 - 3:02AM
Dow Jones News
Activist investor Sherborne takes 5.2% stake as bank's revamp
has yet to pay off
By Margot Patrick
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 20, 2018).
Barclays PLC came under further pressure to step up turnaround
plans after activist investor Sherborne Investors said Monday it
has taken a 5.2% stake in the bank.
Sherborne, founded by investor Edward Bramson, hasn't said if it
plans to seek any changes at the British bank, whose share price
has lagged behind rivals in part because of questions about its
business strategy combining investment banking, credit cards, and
retail and commercial banking. In previous investments in U.K.
investment companies 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 last
year, and some shareholders have questioned whether Chief Executive
Jes Staley has hit on the right strategy. In February, Mr. Staley
said his turnaround plan is 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 last
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 banking sector scares off many activists since regulators have
a much greater say over business plans and capital levels than in
other industries. Even so, last year, Swiss hedge fund RBR Capital
Advisors AG took a crack at getting Credit Suisse Group AG to break
itself 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 Dutch bank 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. The takeover was good for ABN shareholders,
including TCI, but RBS had to be bailed out a year later by the
British government.
People familiar with the matter said Barclays and Sherborne
officials met after the bank's full-year results in February but
that there hasn't been any contact yet with 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 -- some GBP1.8
billion ($2.53 billion) in the case of Barclays.
Barclays said Monday it will "continue to engage with Sherborne"
but didn't give any details. Any activist action against the bank
would add to a host a pressures: In addition to the continuing
restructuring, Barclays is defending itself against U.K. criminal
charges over a 2008 emergency fundraising from Middle Eastern
investors and is in the process of legally separating its retail
and investment banks to meet new, so-called ringfencing rules. The
bank is also waiting to hear if any action will be taken by U.K.
regulators over attempts by Mr. Staley last year to identify a
whistleblower who sent letters criticizing an executive he
hired.
Over 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 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 last year, the people
familiar with the matter said. At the February meeting, Barclays
met with 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 20, 2018 02:47 ET (06:47 GMT)
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