The World’s Most Feared Activist Investor Is Targeting Europe

Updated on
  • Paul Singer’s activist fund adds engineering, health care
  • Activist typically targets underperforming assets for change

Singer Said to Build Stake in Smith & Nephew

Activist investor Paul Singer, whose campaigns in the past year have taken him from Australia to South Korea, is focusing on Europe with efforts aimed at German engineering firm GEA Group AG and British medical-device maker Smith & Nephew Plc.

Singer built a stake of just over 3 percent in GEA Group AG, the German engineering firm said in a statement after trading hours Tuesday, adding to holdings that have routinely prompted clashes with management over strategy.

The disclosure came hours after people familiar with the matter said that Singer’s fund, Elliott Management Corp., was building a stake in London-based Smith & Nephew, a perennial takeover target that’s gearing up for a change in leadership.

Singer has increasingly targeted companies in Europe, including stakes in German pharmaceuticals company Stada Arzneimittel AG and Dutch paint maker Akzo Nobel NV. Both of those investments coincided with takeover situations: Stada was taken over by a private equity consortium after a drawn-out battle, while Akzo management successfully stared down an overture by U.S. rival PPG Industries Inc.

Read more: The world’s most feared investor

Elliott’s stake in GEA crossed the 3 percent disclosure threshold on Oct. 5, according to the statement. A spokesman declined further comment. GEA makes equipment for industries such as food processing, competing with the likes of Alfa Laval AB in Sweden or Germany’s Krones AG, a maker of bottling machines.

Shares in GEA jumped as much as 9.8 percent, the most in a year and a half, and were trading 6.7 percent higher at 40.32 euros as of 12:15 p.m. in Frankfurt trading. Smith & Nephew rose 3.5 percent to 14.06 pounds in London.

Singer’s hedge fund built the stake in Dusseldorf-based GEA over the past few months after deciding there was an opportunity to improve margins and push for a possible share buyback, according to people familiar with the fund’s thinking, who asked not to be identified because the deliberations are private. Elliott will seek to talk to management on topics like combining production sites to cut costs and improving procurement in services operations, the people said.

Singer’s investment comes less than three months after GEA was forced to revise its profit target for this year, resulting in a steep stock drop and prompting analysts at Kepler Cheuvreux to say at the time that trust in management “has finally been destroyed.”

At Smith & Nephew, which makes artificial hips and knees, it’s not yet clear how much of the company Elliott owns or what it plans to push for, separate people familiar with that situation said. Under U.K. disclosure rules, an investor is generally required to report a holding that exceeds 3 percent.

To read Gadfly on Elliott’s prospects at Smith & Nephew, click here

The company, which tied for third place on a list of European acquisition targets for 2017 in a Bloomberg survey of traders, analysts and fund managers, said Monday that Chief Executive Officer Olivier Bohuon will step down by the end of 2018 after seven years in the post.

A spokesman for Smith & Nephew said it doesn’t comment on rumor or speculation or “the identity of our investors other than those publicly disclosed.”

The number of activist campaigns targeting European companies with a market capitalization above 100 million euros grew by 24 percent last year to reach 92, according to Manuel Echterbecker, who monitors shareholder activism with Lazard.

“The most popular campaign objective remained representation on a company’s board, followed by M&A and to a lesser extent concerns around the overall strategy and capital allocation," he said.

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