Elliott Adds Steel to European Bets on Coffee, Property, Telcos

(Bloomberg) -- Billionaire Paul Singer’s Elliott Management Corp. has set its sights on German steel and engineering giant Thyssenkrupp AG, showing that Europe is still on the activist investor’s radar.

Elliott is building a stake in the German company and would like to replace Chief Executive Officer Heinrich Hiesinger, according to people familiar with the matter. The hedge fund may cross the threshold for public disclosure of 3 or 5 percent in coming weeks, they said.

It’s “great timing” for Elliott to step in, suggesting that the potential share price upside is attractive and also that existing activist Cevian should get some assistance, Societe Generale analyst Christian Georges wrote in a note.

All eyes will now be on Thyssenkrupp’s third-quarter results on Aug. 9.

Elliott declined to comment. Here’s a round-up of what to watch for from the hedge fund’s other main European investments in coming weeks and months:

Whitbread (AGM June 27)

Whitbread Plc has been under pressure for years to consider splitting its Costa Coffee shops from its Premier Inn hotels. Less than two weeks after Elliott disclosed its stake in the U.K. company, Whitbread said it would spin off Costa within 24 months. While Elliott was pleased with the demerger announcement, the activist investor believes it should be achieved within six months, according to an April 25 statement.

“The problem you’ve got with putting out too long a timeline on something like this is the uncertainty it may produce in the business itself,” Ed Meier, a London-based fund manager at Whitbread shareholder Old Mutual Global Investors, said in an interview this month.

Shares in Whitbread rose as much as 9.3 percent on Tuesday, before paring gains, following a Press Association report that the U.K. company had been approached informally over a potential buyout of Costa. Whitbread declined to comment.

Micro Focus (1H results July 11)

Elliott jumped on Micro Focus after a profit warning in March sent the shares into freefall, revealing a 5.1 percent stake on April 23. The fund is pushing for changes in a company that’s struggling to digest last year’s $8.8 billion purchase of HPE software assets, people familiar with the matter said. The company has received interest from several private equity suitors, according to a recent CNBC report.

Micro Focus sees 1H revenue above guidance due to “an unusually large licence deal” which closed earlier than expected, the company said on May 16.

Hammerson (1H results July 24)

Elliott increased its position in real-estate company Hammerson Plc to 1.73 percent last month, according to a filing. Hammerson’s chairman, CEO and CFO should all probably resign, Jefferies analyst Mike Prew said in an April 23 note, a day before they were all re-elected by shareholders at the annual general meeting. That same week, the company dropped a bid for Intu Properties Plc, which several Hammerson shareholders had opposed.

Telecom Italia (1H results July 24)

Elliott this month defeated Vivendi SA to take control of Telecom Italia SpA’s board after shareholders supported the activist investor’s call to improve corporate governance and push for asset sales. Vivendi has said it’s concerned by the “new governance” at the Italian company and according to Berenberg analyst Nicolas Didio is likely reluctant to accept the conversion of saving shares at Telecom Italia, which may trigger management instability.

Smith & Nephew (2Q results July 26)

Bloomberg reported in October that Elliott had built a stake in the company. Neither Smith & Nephew nor Elliott has confirmed or denied the holding.

Smith & Nephew’s new CEO Namal Nawana joined on May 7 and his first public communication in the role will probably be at the second-quarter results, according to Morgan Stanley analysts. Elliott has pushed the medical-device maker to boost its attractiveness by shedding assets, the Financial Times reported in October.

The company earlier this month said growth this year will be held back by a weak first-quarter performance in its wound-care unit.

BHP Billiton (FY results in August)

Elliott has been campaigning publicly for more than a year for a range of changes at the company and in February called on it to conduct an independent study to review the potential benefits of a restructuring. BHP has previously said it doesn’t see any major benefit from Elliott’s proposal for an overhaul of its dual-listed structure.

Progress has been made on Elliott’s call to enhance returns, but not on its proposal for a unified BHP because “it remains the most heavily debated and complicated issue at hand,” Bloomberg Intelligence analyst Andrew Cosgrove said last month. The analyst sees an update on the situation by the time of BHP’s results in August, though a decision is unlikely given that the sale process for the company’s U.S. petroleum assets is ongoing.

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