Cevian Capital AB, Europe’s largest activist firm, says enhancing shareholder value through considering a change in where a stock is listed will be a big part of its investment and restructuring campaigns in the coming years.
(Bloomberg) — Cevian Capital AB, Europe’s largest activist firm, says enhancing shareholder value through considering a change in where a stock is listed will be a big part of its investment and restructuring campaigns in the coming years.
Such arbitrage opportunities will be at the top of the firm’s agenda when evaluating investments going forward, according to Christer Gardell, managing partner and founder of Cevian. “We are looking at this everywhere, when it comes to our current portfolio but also when we consider new investments,” he said in an interview in Stockholm.
Cevian, backed by billionaire financier Carl Icahn, holds large minority stakes in European companies including ABB Ltd., Ericsson AB, SKF AB, Pearson Plc, and Rexel SA. The fund is also one of the biggest shareholders in Dublin-based building materials company CRH Plc, which is moving its primary listing to New York from London this month.
While management of CRH has done an “excellent job,” since Cevian started building its stake in 2019, the company is still trading at a discount to its US-listed peers, Gardell said. If valued in line with US-listed competitors Vulcan Materials Co. and Martin Marietta Materials Inc., he said shares would trade above €80 ($86), implying an upside of around 60% from today’s level.
The valuation gap between Europe and the UK has already caused some companies to leave London, with Paris last year overtaking London as Europe’s biggest stock market. The divergence in valuation between the UK capital and New York is also having an impact. That has been pushing firms to increasingly look to the US, with its wider investor base, share-owning culture and bigger pool of capital.
“This will become the theme in the corporate restructuring market in the coming two to three years,” Gardell said. “European companies are beginning to think more actively about how to deal with the valuation gap, as they get more exposed to takeovers by US companies that are valued roughly 30-40% higher.” It will also strengthen the companies’ buying power when participating in M&A activities, he said.
Gardell cited the example of Ferguson Plc, a supplier of plumbing and heating products, which announced a review of its listing structure while trading at a 30% discount to US competitors Home Depot Inc. and Lowe’s Cos. It moved its primary listing to the New York Stock Exchange last year. “Ferguson has now closed two thirds of the valuation gap and generated a total shareholder return of over 140% since it was first announced,” he said.
Gardell wouldn’t single out which companies in the Cevian portfolio he thinks are best suited for a listing move, but said it’s a question they all have to “consider carefully.”
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