A mystery European investor is set to challenge the board of Tate & Lyle, the struggling sugar refiner after amassing a "sizeable economic interest" in the company through equity derivative contracts.
Stock lending sources say that an activist is looking to "further shake-up" the management of the ailing business, which has issued two profit warnings in the past two months. However, the individual is not thought to be looking to pursue a full takeover. The buyer is understood to have a position worth more than 15 per cent of the company's shares.
Under current rules investors can secretly ambush companies by purchasing up contracts for difference (CFDs), which allow investors to get direct exposure to a company's share price, but does not confer voting rights.
CFDs are heavily used by hedge funds and cost only about 10 per cent of the actual share price, and means the buyer avoids stamp duty. CFD owners are able to convert their contracts into stock, which means companies can find themselves ambushed.
High profile examples of surprise CFD attacks include the attempt by Top Shop owner, Sir Philip Green, to buy Marks & Spencer. US investor, Samuel Heyman, played a key role in Nasdaq's battle to buy the London Stock Exchange, after scooping up around 10 per cent of the company's stock through CFD exposure.
However, under new rules being introduced in June, investors will have to disclose CFD positions worth more than 3 per cent of a company's equity, meaning the Tate & Lyle attackers have less than a month to reveal themselves.
Last month reports suggested that Tate & Lyle had hired the head-hunter, Egon Zehnder, to begin a search for a new chief executive, to replace Iain Ferguson, whose combative style is thought to have angered many in the City. Chairman, Sir David Lees, leaves later this year, while finance director, John Nicholas, left last September.
In April the company lost a key legal case in China over its Splenda, sucralose, patent, which Tate & Lyle claimed was being infringed by Chinese manufacturers.
Tate & Lyle's share price has slumped from more than 500p a year ago to 283.85p at the close of play on Friday. A spokesman for Tate & Lyle declined to comment.Reuse content