News & Analysis

Vultures pounce on FTSE 100 insurance giant, targeting female CEO

Andrew Saks, Wednesday, 9 June 2021

 

Ruthlessness and toxic acquisition attempts have been very much in vogue among several top FTSE 100 listed companies this month, and today another high value sitting duck has been targeted.

This time, publicly listed insurance giant AVIVA is in eyeshot of Swedish hedge fund Cevian Capital run by 'activist' investor Christer Gardell.

In corporate terminology, 'activist investor' is a polite moniker for an individual or group that buys a significant stake in a public company in order to influence how the company is run, such as by obtaining seats on its board of directors.

Companies that are mismanaged, have excessive costs, could be run more profitably if taken private, or have other problems the activist investor believes they can fix are often targets for activist investors.

It would be completely churlish to even consider that AVIVA, one of the UK's largest insurance companies, is in any way mismanaged. Its performance over the past year has been exemplary in that it shrugged off the share price collapse that it suffered in March 2020 due to the lockdowns very quickly and stock price has been increasing very nicely indeed until yesterday when it was at its highest point since 2018.

Today, its down 1.71% , which does not seem very much, but when looked at on a 1-day chart, it’s a significant plunge.

The reason for this is quite important to note. Why would an activist investor seek to swoop in on AVIVA and disrupt its management structure when there is no evidence of poor boardroom performance?

The buzz in the analytical echo chambers today is that Cevian is attempting to oust the company's CEO, Amanda Blanc, making her the second female FTSE 100 blue chip chief that has come under attack from determined outsiders this month, the first being GlaxoSmithKline, within which Elliot Management infiltrated and instigated an attempt to kick out CEO Emma Walmsley.

This is likely to accept the inclusivity brigade, as there are currently only six FTSE 100 listed companies that are led by female CEOs, GlaxoSmithKline and AVIVA being two of them, thus if the vultures get their way, the number will reduce to just four out of 100 companies included in the prestigious FTSE 100 index being led by ladies.

These two disruptive forces have connections with each other. The phrase 'thick as thieves' perhaps couldn't be more appropriate.

Elliott Management and Cevian Capital worked together three years ago in attacking German steel giant ThyssenKrupp, which led its incumbent Chairman Ulrich Lehner to denounce the activists for 'psycho-terror' which was a massive news story across Europe.

Interestingly, Lord Myners, the man with common sense who quite rightly back in 2016 along with senior regulators in London, had concerns relating to how trade clearing operations can be expanded across both exchanges during the ill-fated proposed merger between London Stock Exchange and Deutsche Boerse.

Lord Myners, who served as Financial Services Secretary to the UK Treasury between October 2008 and May 2010 under the Labor government of the time and has several senior executive positions behind him which were within large institutions including NatWest and RBS, as well as Lord Rothschild’s RIT Capital Partners where he serves as a board member since August 2010, has a vested interest in the merger, as he was appointed Chair of Governors at the London Stock Exchange in 2014.

He is Cevian Capital's UK Chairman. He has massive influence and was able to stop the merger that would never have come about between Deutsche Boerse and London Stock Exchange, which was an attempt by Frankfurt to remove significant trading power from the world's global financial capital, London. It would never have worked. Lord Myners protected LSE from its fate and held this up as a potentially illegal monopoly that would have created the largest liquidity pool in the world.

He is therefore very much an activist and has massive clout.

Cevian Capital has a long history of clashing with executives in European boardrooms and is currently engaged in battle with firms on its home territory of Sweden, those being Ericsson and Nordea. Both are massive Swedish powerhouses.

Cevian Capital believes that Ms Blanc will likely achieve most of what is required of her this year, so the fund has resorted to goalpost-moving tactics including asking it to return £5 billion to shareholders next year, as well as cut costs by at least £500million by 2023 and raise the share price to more than £8 in three years, doubling the dividend to 45p.

If she doesn't do that, it would be grounds for removal from office. Oddly, stock price rose by 2.7% when Cevian revealed it stake in AVIVA, but when it became likely that the firm is looking to do what it does most - cause a boardroom storm - stock went down in value.

AVIVA made an anodyne statement which gave very little away, saying that it is committed to further improving its corporate performance. What can be gleaned from that? Not much.

Either way, Cevian Capital’s attempts to stir a mood among AVIVA’s executives definitely is not a General Accident, nor will it encourage a healthy Commercial Union.

….OK, I’ll get my coat….

 

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