Worth reading — the letter from TCI telling Tom Enders to flog the EADS stake in Dassault Aviation. This would likely have to be sold over the objections of the French government:
It comes from a hedge fund activist par excellence:
That’s a letter (hat-tip to Bloomberg) from Christopher Hohn, managing partner at The Children’s Investment Fund, to British financial regulators questioning “loss absorbency” of contingent capital at the state-backed lender. The FT reports: Read more
Patrick Degorce, an ex-Merrill Lynch banker who co-founded activist manager The Childrens’ Investment Fund with Chris Hohn, has raised more than $700m for his new hedge fund, Thélème Partners, reports the FT. The amount makes Thélème the biggest equity hedge fund launch since the financial crisis. The fund, which Degorce runs alongside fellow former TCI partner Snehal Amin, has already returned just over 10% since it launched in February – beating peers in what has been one of the sector’s most difficult years, with the average equity long/short hedge fund returning just 3.72% over the past 10 months, according to Hedge Fund Research.
The Children’s Investment Fund Management, the UK hedge fund manager run by Christopher Hohn, posted its fourth consecutive year of double-digit growth in 2007. Revenue rose more than 70% from £333m to £574m, according to the 2008 accounts filed this week. Performance at the underlying TCI funds in 2008, however, was down 43%, as a number of investments went awry.
Totemic UK hedge fund manager and activist investor par excellence, The Children’s Investment Fund Management, run by Christopher Hohn, has indeed posted its fourth consecutive year of double-digit growth: revenue was lifted more than 70 per cent to £574m from £333m a year previously, according to the 2008 accounts, filed this week at Companies House. Read more
It was almost a year ago that UK activist investor The Children’s Investment fund was making huge waves in Japan, not least with its full-frontal assault on Electric Power Development Co, the Japanese electric power wholesaler and nuclear energy company known locally as J-Power.
It wasn’t as if TCI didn’t have enough on its plate already: In the US, the $9.5bn UK hedge fund was fighting for radical changes at national railroad CSX and had taken a stake of almost 1 per cent in the CME Group and a smaller stake in the New York Mercantile Exchange Group in the midst of the two groups struggling to persuade shareholders to back their proposed $9bn merger. The previous year, TCI had been agitating at ABN Amro, as well as attempting to block the merger of the NYSE and Euronext. Read more
The Children’s Investment Fund, the activist hedge fund, has suffered another setback with the resignation of John Ho, its Asia director. Chris Hohn, TCI founding partner, told investors in a letter this week, that Ho, 32, would leave the fund for personal reasons. Ho’s departure comes at a difficult time for TCI, which suffered a decline of more than 40% in the value of its global investments in 2008 and has lost three senior members already this year.
A key chapter in shareholder activism ended at Deutsche Börse when The Children’s Investment Fund sold most of its stake, ending its efforts to influence strategy at the German exchange group. The hedge fund followed Atticus Capital, its erstwhile partner, in announcing it had slashed its holding. The funds together had owned almost 20% of the Börse but Atticus cut this to under 2% this week while TCI’s stake fell below 1%.
Deutsche Börse could be heading for another confrontation with the two hedge funds that are the German group’s biggest shareholders after rejecting their ideas for reform. Proposals from The Children’s Investment Fund and Atticus Capital include Deutsche Börse merging its stock exchange with a rival and selling its clearing division or the whole company. In a Tuesday meeting, Kurt Viermetz, chairman, and Reto Francioni, chief executive, told TCI’s founder Chris Hohn that they wanted to keep the group together. Viermetz, who turns 70 in April, has also rejected TCI’s demand that he make way for a new chairman – setting the scene for a possible repeat of the fight three years ago between the exchange and TCI and Atticus – then acting separately – when the two hedge funds forced out chairman Rolf Breuer and chief executive Werner Seifert. Lex, however, says the hedge funds should simply bag their gains and move on”.
Atticus Capital and The Children’s Investment Fund, the activist hedge funds that are the two biggest investors in Deutsche Börse, warned the stock exchange group to take urgent action to boost shareholder value, indicating that the Börse is moving too slowly with efforts to realise the full value of the diversified group, including a possible sale of a stake in its highly profitable Clearstream settlement business. Atticus and TCI informed Germany’s financial regulator they controlled 19% of the bourse’s voting rights and said their actions “may include” seeking to change some supervisory board members.
Oddly, the wires have been relying on their German counterparts for the copy on this one. It seems that notwithstanding a couple of paper copies, the TCI/Atticus release wasn’t made available to the UK English-speaking press.
Ooops. Read more
Here’s an odd, apparently content-free statement-of-the-crushingly-obvious:
RTRS – The Children’s Investment Fund Management and Atticus Capital have reached agreement to work together for the purposes of exploring all options for shareholder value creation at Deutsche Boerse. Read more
For those who continue to believe that politicians might be expected to understand a bit about finance, here are some extracts from the appearance of a hedge fund The Childrens Investment fund in front of Corrine Brown in the House of Representatives.
The transcript dates back to March, but deserves an airing: Read more
The Children’s Investment Fund, the London hedge fund, lost more than $1bn in its worst month ever in June as activists were hit particularly badly by the poor markets. TCI, which manages more than $10bn, slumped 12½% in the month, according to investors in the fund, to leave it in the red for the first half of the year.
Activist shareholders seeking better returns on Japanese investments suffered a setback Thursday as a majority of shareholders in J-Power rejected calls by The Children’s Investment Fund for higher shareholder returns. In a closely watched confrontation between the Japanese electricity wholesaler and the activist UK fund, shareholders voted against all five proposals by TCI. The development follows Tokyo’s decision not to allow TCI to increase its stake in J-Power from 9.9% to 20%, on national security grounds. Thursday’s outcome, coupled with concerns about protectionism prompted by the government decision, is likely to further dampen foreign investors’ appetite for Japan assets. Lex says TCI’s timing now looks unfortunate, its target ill-judged and that the fund should “question the wisdom of sticking around”.
Not a happy week for Chris Hohn, founder and chief rabble rouser at activist hedge fund The Childrens Investment fund.
Hohn certainly likes a good fight, as seen in his haranguing of all kinds of companies ranging from ABN Amro last year, to his two latest targets: CSX, the US rail operator, and J-Power, the Japanese electricity wholesaler. Read more
The battle by two hedge funds to claim seats on the board of CSX reached a bizarre climax on Wednesday after the US railway operator’s shareholder meeting, when the funds said they had won at least four seats, but CSX said the vote was too close to call. CSX has been engaged in a bitter eight-month fight to stave off the funds, UK-based The Children’s Investment fund and Brazil-based 3G, which have demanded five seats on its 12-seat board. CSX said Wednesday that an independent inspector needed several weeks to tabulate the results of the shareholders’ vote and that it would reconvene the meeting on July 25, to certify the results.
Activist hedge funds will find it harder to build secret stakes in target companies using derivatives after a US judge ruled The Children’s Investment Fund, the UK hedge fund, should have disclosed holdings in CSX, a US rail network. The ruling in a Manhattan court overturns standard practice on disclosure of derivatives that give buyers exposure to the value of share price movements but no voting rights. Wall Street trade bodies and the SEC had opposed changes to the rules, warning they could create “significant uncertainties” for investors. Judge Lewis Kaplan dismissed TCI’s arguments, saying there was “overwhelming” evidence the hedge fund used derivatives to evade reporting requirements.
The US Treasury is unlikely to pursue a request by senators to investigate an attempt by the Children’s Investment Fund, the UK activist hedge fund, to replace some board members at the rail operator CSX. Snehal Amin, a partner at TCI, told the FT that the fund’s attorney had been in contact with Cfius, the US committee that investigates foreign deals, to answer questions about the deal and had offered to make TCI partners available to the committee. But in a sign that the Treasury is unlikely to seek an investigation, the department has not requested a meeting or asked the hedge fund to submit the transaction for formal review.
Save the date: June 9, 11.00 EDT.
Special Forum: Proxy Contest at CSX Corporation Read more
TCI, the UK hedge fund whose bid to increase its stake in Japanese electricity supplier J-Power was blocked by Japan’s government, bought shares in Mizuho Financial Group and Kajima Corp. to get major shareholders to prod the utility to boost returns, reports Bloomberg. The activist fund bought stakes of less than 5% in Mizuho, Japan’s second-biggest bank, and Kajima, the nation’s biggest general contractor, in the past couple of months, John Ho, head of TCI’s Asia division said Monday. TCI, which has $10bn of assets, invested in the companies because they are common shareholders of Electric Power Development Co, as J-Power is known, and will seek to hold them accountable on how they vote, Ho said. TCI is J-Power’s biggest shareholder, with a 9.9% stake.
The gloves are off in Tokyo as one of Britain’s most unloved but widely championed activist investors, The Children’s Investment Fund, goes full-frontal in its assault on Electric Power Development Co, the Japanese electric power wholesaler and nuclear energy company known locally as J-Power.
It’s one of those vicious but complex corporate battles that can easily lose the initiated with its arcane twists and inside detail — in this case, far more than the average reader probably needs or wants to know. Read more
UK activist investor The Children’s Investment Fund on Thursday announced it will defy the Japanese government’s request to drop its move to increase its 9.9% stake in J-Power to 20%. TCI, whose bid to raise its stake in the electricity wholesaler has been rejected on the grounds it threatens national security, argues that Tokyo’s reasons for rejection are based on factually incorrect information and that the process was not transparent. Tokyo is now expected to issue a legally binding administrative order to stop TCI from increasing its investment. TCI has the option of filing an objection with the government. If that is rejected, it could go to court to request the lifting of the government’s order.
The Children’s Investment Fund on Wednesday appealed to the UK government to “formally intervene and impose trade and investment sanctions” on Japan, after the Japanese government blocked the activist fund’s bid to raise its stake in J-Power on national security grounds. In a letter to UK government ministries, TCI requests the UK government and the EU to formally investigate the process by which Tokoyo rejected the bid. TCI had attempted to raise its stake in the Japanese electric power wholesaler from 9.9% to 20%.
The Japanese government has rejected a bid by The Children’s Investment Fund to increase its stake in J-Power to 20% from 9.9%, the first time Tokyo has blocked a foreign investment in a public company. Japan’s Ministry of Finance and the Ministry of Economy, Trade and Industry jointly recommended that the UK-based fund drop its plan to buy up to 20% of J-Power, an electricity wholesaler, claiming it would “impede the stable supply of electric power… and disturb the maintenance of public order”. TCI has until April 25 to accept or reject the ministries’ recommendation. If it rejects it, it will be ordered to cancel its plan. The fund said Wednesday it would consider its options. Read more details here.
Japan’s government on Monday warned that a plan by the Children’s Investment Fund to increase its stake in J-Power, Japan’s electricity wholesaler, could “disturb the public order”. The UK-based hedge fund has urged Japan’s largest electricity supplier to adopt proposals aimed at boosting profitability and improving shareholder returns. Takao Kitabata, Japan’s vice minister of trade, said TCI’s efforts to raise its stake in J-Power, from 9.9% to a maximum 20%, could affect “stable supplies” of electricity. His remarks suggest TCI will not gain the required government approval to raise its stake.
US lawmakers on Wednesday expressed deep reservations about attempts by The Children’s Investment Fund, the UK hedge fund, to increase control of US rail operator CSX, suggesting the move would threaten public safety and put US infrastructure in foreign hands. Legislators’ criticism of TCI, aired before the House transportation committee, included claims that the firm’s “aggressive” investment tactics would lead to a decline in capital investment at CSX.
Politicians will enter the increasingly bitter feud between one of London’s most powerful hedge funds and CSX, one of the biggest US railway operators, next week when The Children’s Investment Fund faces scrutiny in Washington. The voluntary appearance of TCI, the second-largest shareholder in CSX, before the House of Representatives subcommittee on railroads has the potential to become a highly politicised step in the attempt by CSX to resist the hedge fund’s demands. TCI founding partner Snehal Amin is expected to face questions about foreign ownership of US infrastructure, as well as its secrecy and its questioning of capital spending at CSX.
The chief executive of CSX, the US railroad under pressure from The Children’s Investment Fund, has hit back at the hedge fund saying it had a history of presenting flawed plans. Michael Ward defended the recent record of CSX, one of only two major railroad operators on the US eastern seaboard. Returns to shareholders in the past three years had been the sector’s best, he said. He sarcastically dismissed the TCI’s proposals as “more good ideas”.
One of the largest railroad owners in the US has become the country’s first big target of The Children’s Investment Fund, the UK activist investor, which has published an open letter demanding change at the company. Florida-based CSX Corporation, which was due to publish Q3s on Tuesday, earns some of the poorest returns of any of the large, Class I railroads. TCI holds 4.1 per cent of CSX and is said to be considering any available option to force change if management fails to respond positively to its demands.