An activist investment firm asks for a review of HSBC strategy
LONDON: Knight Vinke Asset Management, the activist investment firm that campaigned to block Suezs merger with Gaz de France, said it had asked the chairman and the board of HSBC Holdings to conduct a “fundamental review” of the banks strategy and management structure.
Knight Vinke, based in New York, disclosed its contact with HSBC in an e-mailed statement Friday. The firm wrote to HSBCs executive chairman on May 25, met with the group finance director on June 12 and wrote to the full board of the London-based lender on Sept. 4, according to the statement.
Earlier this year, an activist investor - the British hedge fund TCI - pressured ABN AMRO to sell split up to lift shareholder returns. The bank subsequently agreed to be taken over by Barclays and faced a rival bid from a consortium led by Royal Bank of Scotland.
Knight Vinke, led by the companys chief investment officer Eric Knight, targets large, publicly traded companies and seeks to recruit other institutional investors to press the companies management to change course.
HSBC, Europes biggest bank by market value, is seeking to expand into emerging markets as it suffers losses in the United States related to the collapse of the subprime mortgage market.
“It is not entirely clear what Knight Vinkes motivation is, but the timing does not seem right, it all seems bizarre,” said Antony Broadbent, an analyst at Sanford C. Bernstein in London. “It doesnt feel like the right time” for HSBC to get a good price for the sale of its U.S. unit, and the company has “refocused on emerging markets,” he added.
HSBCs shares rose 0.3 percent to 889 pence early in London, valuing the company at about 105 billion, or $212 billion. HSBC shares have declined 4 percent in the past three months, making them the best performer in the nine-member FTSE 350 banks index.
HSBC was not immediately available for comment.
Martin Forrest, a Knight Vinke spokesman in Monaco, declined to say what changes the firm wanted HSBC to make. He confirmed that Knight Vinke owned less that 1 percent of the lenders shares. Investors in Knights firm include the California Public Employees Retirement System, or Calpers, the largest public pension in the United States.
HSBCs provisions for bad loans, made primarily to U.S. borrowers with poor credit histories, climbed 63 percent to almost $6.4 billion in the first half of 2007, HBSC said in July. The company said Aug. 22 that it planned to close its Carmel, Indiana, office by the end of the second quarter of next year, eliminating 600 jobs.
The bank, which bought Household International, based in Prospect Heights, Illinois, for $15.5 billion in 2003, has scaled back home-equity loans and ousted the units managers.
Knight Vinke sold its less-than-one-percent stake in Suez in January after waging a campaign to derail the French gas utilitys planned merger with Gaz de France. The public contest helped push Suez stock to a record high.
Knight said at the time that he began selling when Suez stock hit \39, or $53, driven up by speculation that rival bidders would step in as the merger with Gaz de France stalled.
Knight argued in more than a dozen full-page advertisements, including in The Financial Times and Le Monde, that the French government-arranged merger was unfair to Suez shareholders. Knight rallied institutional investors to call for better terms in the deal.
Separately, HSBC Trinkaus Burkhardt, the German bank controlled by HSBC Holdings, would consider buying IKB Deutsche Industriebank after it had to be bailed out because of the U.S. subprime mortgage market rout.
“IKB, reduced to its core of classical long-term corporate lending, is interesting,” the head of HSBC Trinkaus, Andreas Schmitz, said in an interview in Frankfurt on Thursday. Both of the lenders are based in Dьsseldorf, which offers “certain synergies,” Schmitz said.
