Badminton star-turned hedge fund tycoon takes a swipe at FirstGroup
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Thursday 16 January 2014
The activist investor Tom Sandell is not a man to be brushed off lightly, as troubled trains and buses operator FirstGroup is discovering.
Mr Sandell, a Swedish born New Yorker, has racked up personal wealth of more than $1bn (£610m) by buying stakes in businesses and persuading (let's not say "strong-arming") them to make changes that increase the value of his stake.
Having watched the travails of FirstGroup for several years, aided by his knowledge of its US bus operations, Mr Sandell, 52, broke cover last month to agitate for a break-up of the business.
He urged the sprawling company to sell its Greyhound coaches arm, spin off the remaining American operations and invest the proceeds in its UK bus and rail franchises such as First Capital Connect. In other words, to get back to basics.
First snubbed him, saying it had a turnaround plan of its own, thankyou very much.
But yesterday, the bespectacled former badminton prodigy returned to the fray, saying he was "disappointed that the company has chosen to characterise the proposals as containing 'structural flaws' and 'inaccuracies'". It should "reconsider its premature rejection of the proposals", he said.
It's not as if Mr Sandell hasn't been here before, having learned his trade at the knee of such Wall Street takeover titans as Ace Greenberg at Bear Stearns and working on some of the most audacious takeovers and restructurings of modern times, including Kirk Kerkorian's takeover of Chrysler.
Yesterday's renewed pop at FirstGroup came just a day after he filed a lawsuit against the management of another management team he's seeking to influence – this time a US-wide restaurant chain, Bob Evans. He's also taking a pugilistic stance over what he sees as the undervalued share price at a pipeline company called Spectra.
His European upbringing – he studied at Uppsala university in Sweden before working in Paris until finally succumbing to headhunters' calls from Wall Street – is seen as one of his greatest strengths. Bear Stearns, in those days the daddy of takeovers, was one of the first to spot big deal opportunities in the 1990s in Europe.
By 1998, Mr Sandell had left to set up his own hedge fund, Castlerigg, largely with investments from wealthy Swedes. He was soon winning awards for performance.
Yesterday, he claimed he was also winning over FirstGroup's shareholders, although a muted reaction in the share price was showing little sign of that. Analysts did not see the logic of making disposals, and could not immediately think of a long list of potential buyers.
FirstGroup sources responded that "nothing had changed", pointing to flaws in Mr Sandell's plans, including the cost of spinning off businesses in the US and potential opposition from pension trustees overseeing the company's £250m deficit.
Nonetheless, Mr Sandell will keep pushing: "We firmly believe that the company should take advantage of the current favourable market conditions to maximise the chance of success at both FirstGroup US and New FirstGroup in the long term. The favourable market conditions will not continue indefinitely, and the options available to the company now may not be available in the future."
He is said to be particularly irritated that the FirstGroup board will not even discuss his proposals. Word is, he's coming to London in the next couple of days. Don't expect him to leave quietly.
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