Wed, 04/06/2008 - 07:00
The Children's Investment Fund Management seems to have its fingers in many, many pies. It has been rumoured that the London-based hedge fund manager headed by Chris Hohn has been building a stake in Royal Bank of Scotland.
Edinburgh-based RBS, Britain's second-biggest bank, gained 8.3 per cent in London trading on Tuesday, fuelling speculation that investor demand is stronger than expected for the new shares offered in its GBP12bn rights issue.
But the rumour is that TCI is taking a stake of about 1 per cent to agitate for a break-up of RBS, in the same way that it helped to trigger the sale of ABN Amro - now, coincidentally, part-owned by RBS, whose outlay on the Dutch-based banking group was one of the factors that has forced it to go cap in hand to its shareholders.
TCI has extensive form as an activist hedge fund prize. It has already engaged with US railway operator CSX, waging a proxy battle to get its nominees elected to the company's board. The fund has also intensified its battle with Japanese nuclear energy group Electric Power Development, saying it intends to gather shareholder support to push through a series of proposals at next month's annual general meeting.
Now the word is that it may be the turn of RBS. Activist hedge funds seek to act as a catalyst, shaking up the target company's management and strategies to generate greater returns to shareholders.
MF Global Securities analyst Simon Maughan told Bloomberg: 'They've made a series of strategic errors,' and shareholders would gain if RBS's investment bank were split off. It would be par for the course for TCI to initiate the process.
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