Cevian Said to Shake Off ABB Tussle to Post 12.9% Gain

  • Swedish investor’s fund beats peers through end of September
  • Cevian profits from stakes in ABB, ThyssenKrupp, Danske Bank

Cevian Capital AB, the Swedish activist investor locked in a battle with Swiss industrial giant ABB Ltd., achieved a return on its main fund that was more than double the industry average, according to a report sent to investors.

Cevian Capital II posted a 12.9 percent gain in its net asset value in the first nine months of the year, according to documents seen by Bloomberg News. That compares to a 4.7 percent increase by activist peers, according to data from Hedge Fund Research Inc. The return brings the Cevian fund’s gains since its July 2006 inception to 193.4 percent.

A spokesman for Cevian declined to comment.

Cevian has been in a public battle with ABB over strategy after becoming the company’s second-biggest shareholder last year. The fund has urged the engineering company’s management to spin off its power-grids unit, a move that ABB rejected earlier this month after completing a review. That decision prompted additional criticism from Cevian.

Founded by management consultant Christer Gardell and private equity investor Lars Forberg in 2002, Cevian’s bid to create value by separating disparate units at ABB is typical of its strategy. Cevian’s influence at Finland’s Metso Oyj and Germany’s Bilfinger SE led to both companies splitting off units. The firm manages more than 12 billion euros ($13.1 billion) in assets for pension and sovereign wealth funds and investors, and doesn’t short, hedge or use leverage.

ABB shares gained about 21 percent this year through the end of September, while German steelmaker ThyssenKrupp AG -- where Cevian is the second-biggest shareholder -- climbed 16 percent. Danske Bank A/S is up 4.4 percent in the first nine months, while Bilfinger has lost 32 percent, according to Bloomberg data.

European Activism

Cevian’s battles highlight how activism is reshaping European boardrooms. As of the end of September, 79 companies in the region had been publicly targeted by activists, according to research by London-based Activist Insight.

For more on Cevian’s investment strategy in Europe, click here

Knight Vinke Institutional Partners, a fund managed by activist investor EricKnight, posted a gross return of 14.8 percent in the three months through September, according to a letter sent to investors earlier this month. That compares to a 14.6 percent net gain for Cevian’s fund in the third quarter.

Unlike many of its American peers, Cevian has typically eschewed public proxy fights. Still, the company follows a similar script, first building up stakes in what it deems to be undervalued businesses to ensure that management is obliged to listen, then pressing for change. If lobbying management privately doesn’t work, Cevian goes public with its critique.

ABB Rejection

ABB’s rejection of Cevian’s plans came after months of behind-the-scenes sparring and revealed deep divisions among the company’s other large shareholders. Swedish shareholder Investor AB President Johan Forssell backed management, saying ABB is worth more in one piece. Artisan Partners Ltd.’s Managing Director David Samra told a Swedish newspaper that ABB’s strategy lacked focus.

ABB Chief Executive Officer Ulrich Spiesshofer has made management changes, lowered costs and last month agreed to sell a niche high-voltage cable operation within the power-grid division. That sale, representing only 5 percent of the unit’s revenue, failed to appease Cevian, which continued to push for a break up.

ABB shares slumped the most in four months on Thursday after it said orders plunged, partially blaming uncertainty about the future of its power grid business as well as the U.K.’s decision to leave the European Union.

— With assistance by Nishant Kumar

    Before it's here, it's on the Bloomberg Terminal.