Gabriel Radzyminski runs Sandon Capital, a specialist activist Australian equities listed investment company, which is firmly in the economic activist tradition.
âWhen people say activism is on the rise, our style of investment is still very much in the minority, where we deliberately target companies with a view to try to make change, to create or unlock shareholder value. Weâre not really interested in âissues-basedâ activism, because at the end of the day, thatâs really just a difference of opinion. Weâre activists with a specific financial strategy.â
Active investment managers will often express their disappointment with the way a company is being run by going underweight in the stock, says Radzyminski. This is sometimes called âaccidentalâ activism, where someone who bought the stock for their own criteria is dissatisfied with some aspect of its business or structure, and tries to exhert influence to bring about change.
A good example, he says, is Matt Williams (former head of equities at Perpetual), who fought for several years to dissolve the cross-ownership of brickmaker Brickworks and investment group Washington H. Soul Pattinson â or even to merge the two â claiming that that could unlock $1 billion of shareholder value which was suppressed by the arrangement.
âAlthough he was unsuccessful, at least [Williams] tried to do something about it,â says Radzyminski. âOr you have the likes of [equities manager] Allan Gray â while theyâre not buying companies deliberately with a view to being an activist, if something happens that they donât like, they will agitate for change to defend their position.â
Sandon, however, deliberately buys shares in companies that it thinks could be doing better, or that own assets with more value than the market currently recognises. âWe have a very strong conviction in our views, and weâre prepared to express those views in more than just selling shares in companies we donât like. Then weâll agitate for change. Weâre no different to any other shareholder, itâs just that weâre prepared to do a hell of a lot more to get the results we want.â
A current example is Sandonâs campaign to convince Tatts Group to sell its wagering business â which contributes 38 per cent of the companyâs earnings before interest and tax â and concentrate on the lotteries business (60 per cent of EBIT). âThe lotteries business has attributes that are very similar to infrastructure assets, but theyâre not valued accordingly,â says Radzyminski. âWe think the sum of the Tatts Group parts is worth significantly more than the current market price.
âWe believe the company is worth more than $5.50 if separated, versus $3.70 at present, and if growth opportunities in lotteries are pursued and value-creative capital management options undertaken, it could be worth more. As you might imagine, the company and the board donât want to do that â to them itâs a case of, âWhy would we want to become smaller?â But from our perspective as a shareholder we donât care so much about size, we care about value on a per share basis,â says Radzyminski.
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