RHJ Strategy and Pay Warrants Board Overhaul, Hedge Funds Say

A group of hedge funds criticized RHJ International (RHJI) SA’s acquisition strategy as “erratic” and payments to managers as “egregious” as they repeated their call for a board overhaul and return of capital to investors.

Several of the companies Brussels-based RHJ has bought since its 2005 initial public offering have been sold at a loss or filed for bankruptcy, Equilibria Capital Management Ltd. wrote in a letter to RHJ shareholders today. Equilibria, which said it’s working with four more funds, estimated RHJ Chief Executive Officer Leonhard Fischer has been paid as much as 28 million euros ($36.6 million) since 2007 as the stock slid 73 percent and the company posted losses.

“The pay practices at RHJI are egregious, particularly in the face of continued losses,” the Geneva-based hedge fund said in the letter. The compensation is “further evidence of RHJI’s dysfunctional structure and lack of adequate oversight.”

RHJ defended its strategy yesterday, including the planned purchase of Deutsche Bank AG’s (DBK) BHF-Bank, after the hedge funds first made their criticisms public May 28. Equilibria opposes the BHF-Bank acquisition and wants resolutions put to a shareholder vote at the June 18 annual general meeting that would put stricter limits on executive pay, require RHJ to distribute 1.75 euros a share to investors and appoint more independent directors.

Duncan Heath, RHJ’s director of investor relations, didn’t return a telephone call or an e-mail seeking comment. RHJ is the publicly traded investment company started by Timothy Collins, founder of private equity firm Ripplewood Holdings LLC, and owns U.K. private bank Kleinwort Benson.

‘Future Upturn’

RHJ, in a statement posted on its website yesterday, said the BHF-Bank purchase and other investments would “position the company effectively for a future upturn.” Frankfurt-based Deutsche Bank and RHJ’s co-investors may also be in a position to sue for damages if RHJ abandons the BHF-Bank purchase, the company said in the statement.

The group of hedge funds, which includes Equilibria, Polar Capital Holdings Plc (POLR), Mantra Investment, Alpha Plus and Overseas Asset Management Ltd., said it owns about 4 percent of RHJ.

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