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International Press Coverage of CIAM

Activist Investor Accuses Euro Disney of Magic in Accounting

Wall Street Journal
by Laurence Fletcher

Guy Wyser-Pratte says Euro Disney's €565 million impairment charge is aimed at allowing Walt Disney Co. to gain full control of company
An activist investor in struggling resort Euro Disney says a charge the company took following the Paris terror attacks amounts to an “accounting trick.”
In a letter to the company, seen by The Wall Street Journal, Guy Wyser-Pratte, a veteran activist who heads U.S.-based Wyser-Pratte Management Co., says a €565 million impairment charge reported by Euro Disney this month is aimed at bringing down Euro Disney’s share price and allowing majority owner Walt Disney to gain full control of the firm.
“We consider the allegations in the open letter of Wyser-Pratte to be false and unfounded,” said a spokesman for Euro Disney.

Walt Disney didn’t respond to requests for comment.

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Wall Street JournalCIAM
The female activist hedge fund duo shaking up European M&A

The Deal
by Ron Orol

The hedge fund industry - like many sectors - is dominated by men. And while a few women work for activist managers here and there it is extremely uncommon, almost unheard of, for activist funds to be founded and operated by women - especially in continental Europe.

Enter Anne Sophie D'Andlau, 43, and her partner, Catherine Berjal, 47 (both pictured with D'Andlau on the left), co-founders of Charity Investment Asset Management, or CIAM. A Paris-based, five-year-old event-driven fund, CIAM adjusted its strategy three years ago to include deal-related activism.

“We think a shift towards activism is a natural evolution from event-driven investment,” D'Andlau said in an interview with The Deal. “What we found was that when it came to all these M&A events and undervalued corporations, there was an opportunity to be more active to push for a catalyst impact on the share price.”

The activist fund, which donates 25% of its performance fees to childhood-focused charities, made a name for itself in the French and U.K. press as a result of its campaign against Club Méditeranée SA (Club Med) in 2013 - 2015. There, CIAM and an investor group filed a lawsuit challenging an offer for the French holiday operator that ultimately allowed a counter-bidder to enter the process. The result was a €939 million ($1.1 billion) acquisition by China’s Fosun International Ltd. at a significant premium to the original offer. “Our blocking of the offer and outpouring of concerns from other investors allowed a counter-bidder to enter the battle and ended up in a 45% premium,” D'Andlau said.

Today, the insurgent managers are locked in a heated battle at SFR Group, a French telecom operator that is majority owned by Luxembourg-based telecom and media company Altice SA, a company controlled by billionaire Patrick Drahi. Altice announced earlier this month that it was seeking to buy out SFR’s minority shareholders, which control a 22% stake, with an all-share offer that represented only a 2.6% premium to the closing price on Sept. 2 the day before the offer.

Upon the announcement of the offer CIAM jumped into action. The fund’s stake in SFR, D'Andlau says is a “core position for the fund’s portfolio,” and wrote a publicly-disclosed letter to the French regulator, Autorité des Marchés Financiers, or AMF, contesting a fairness opinion on the offer, in particular, some of the valuation methods employed by an outside accounting firm, Accuracy, hired by SFR.

“We track these types of inefficiencies,” she said. “This is our role - to intervene.”

Specifically, D'Andlau contends that Accuracy employed a discounted cash flow valuation method for the all-stock deal that took into consideration the worst valuation for SFR and the best valuation for Altice, leading to a very depressed exchange ratio. “They excluded comparable valuation methods, such as considering similar deals in the sector,” D'Andlau said. “It was skewed to the worst ratio possible and even Accuracy said they picked the low end of the range.”

In addition, CIAM argued that two of the three directors at SFR overseeing the fairness opinion aren’t independent and have close relationships with major French and international banks, including ones that have historical business relationships with Altice.

Responding to CIAM’s letter, the regulator, AMF, on Wednesday blocked Altice’s offer for the 22% of SFR it didn’t own, noting only so far that the offer did not conform to market regulations. So far it is unclear what exactly that means but it could be related to price of the offer. Altice could challenge the AMF intervention or hike its offer to one that CIAM and other investors accept. “This is clearly a victory for us,” D'Andlau said. “If we had not intervened, we think there is a high probability the outcome would have been different.”

CIAM’s campaign at SFR comes as activism is on the march in Europe. According to Activist Insight, there were 40 targets headquartered in continental Europe in the first half of 2016, up from only 9 in 2010. Altogether there were 64 companies in the U.K. and Europe targeted in the first half of 2016 – that number is already almost as many as the 67 targets in all of 2015 and up from 51 in 2014. The U.K. has consistently remained the country in Europe faced with the most activism over the past six years, it remains far behind the U.S. in terms of activist encounters. Activist Insight notes that there were 26 U.K. targets in 2015 while only six in France, two in Germany and six in Italy.

With so few cases of activism in France and southern Europe, D'Andlau says she sees an opportunity. “In terms of trends is we haven’t seen a lot of money allocated to the European activist space as of yet,” she said. “Most of the actions in Europe have been done by non-European activist firms.”

However, CIAM’s strategy for activism differs significantly from the U.S. approach, where funds routinely launch proxy contests to install dissident directors onto corporate boards as part of their share-price improvement efforts and M&A-driven pressure tactics. In Europe, D'Andlau notes that it is quite rare for an activist to launch a proxy contest, arguing that it is usually costly and doesn’t achieve the share-price improvement the insurgent is seeking. Taking a campaign public, she notes, puts enough pressure on dealmakers and corporate executives to respond.

“Our stick is to go public with our campaigns. They don’t want us to go to the press,” she said.

D'Andlau sees an evolution around how the European corporate and investment world perceives of activism - transitioning “from a very bad reputation” a few years ago. “We have seen quite a shift in the perception from institutional investors across the whole of Europe,” she said. “Some institutional investors like what we’re doing, that we’re doing the job as they don’t want to be seen doing the job. Some of them are invested with us.”

D'Andlau says she and Berjal see CIAM as the emergence of a small counterweight to Europe’s “very clubby” corporate environment. And for D'Andlau and Berjal, that environment is a male-dominated one.

There is at least one benefit to being a female duo in the activism sector. “It is difficult to be a woman in this environment. Europe is an old fashioned continent and the money is run by men,” she said. “But there is one positive aspect of being women in this environment and that is people remember us.”

And considering that clubby world, D'Andlau believes activist funds will increasingly put a spotlight on corporate governance failures in Europe, an area she believes needs dramatic improvement. For example, D'Andlau believes that boards should have independent chairmen and independent directors.

“It is really the beginning of a focus on governance. It is going to take time. It’s the beginning of a trend that will become important,” she said. “We believe an independent chairman and some independent directors are critical to the proper functioning of a company. The reality is they all come from the same schools, they all know each other for many years and have no real independe

nce and won’t provide independent oversight of the top executives.”

For now, the question is whether the credibility CIAM has built up in France after its high-profile Club Med campaign success will help in the months to come with the fund’s efforts at SFR and beyond. “We think Altice wants to close the deal as soon as possible so it can focus on new developments for the group,” she said.

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The DealCIAM
CIAM ready for legal battle against SFR buyout

Activist Insight

Paris-based hedge fund CIAM has told Activist Insight that they will watch closely the French market regulator's decision on Altice's bid to acquire complete control of telecoms company SFR. Last week, the investment firm sent a letter to the AMF (Autorité des marchés financiers) saying that there were irregularities in Altice's offer, and asked the regulator to intervene. In a Wednesday interview, the investment firm's co-founder Anne-Sophie D'Andlau said that, whatever the AMF's decision, they "will not let it go." "Several minority investors have called us after the letter. They called from France, from the rest of Europe, and even from America. There is a high level of discontent. We are ready to go down the legal route if necessary," she said. A decision by the AMF on Altice's all-stock tender offer for the 22.3% of the SFR's shares it does not already own was expected for Tuesday. However, the regulator delayed the decision by at least two weeks. Altice's bid was submitted earlier in September, and valued SFR's stock at 24.72 euros - a 2.6% premium to the unaffected price. CIAM believes that Altice wants to "squeeze the minorities out." To take the company private, the bidder needs to gain control of 95% of the outstanding shares. In its letter to the AMF, CIAM claimed that a report by an independent expert hired by SFR to evaluate the deal was clearly biased. In addition, CIAM believes that the SFR independent directors who supervised the adviser's work were not really independent. Merger arbitrage lists among the main strategies adopted by CIAM. Around a quarter of the hedge fund's portfolio is dedicated to bids that undervalue the target companies. In 2015, the investment firm got in the way of The Walt Disney Company's attempt to buyout its French subsidiary Euro Disney. CIAM started a legal battle against the merger, and an appeal on the case is still pending at the French Court of Cassation. A criminal proceeding on the issue is also still ongoing. "We are working a lot behind the scenes on this issue," D'Andlau told Activist Insight on Wednesday. In 2013, CIAM also waged a campaign against Chinese conglomerate Fosun International's attempted takeover of vacation villages operator Club Méditerranée, managing to have the deal frozen by regulators. Eventually, Italian investor Andrea Bonomi made a competing offer, triggering a two-year-long bidding war for the French company - which was won by Fosun. CIAM also teamed up with other funds to push Vivendi to increase a bid to acquire full control of Canal+. "Over the last three years, we pursued around seven-eight activist campaigns, and only 30-50% of our portfolio has been dedicated to activist positions," D'Andlau told Activist Insight, adding that when they are not involved in merger arbitrage campaigns, they prefer to work behind the scenes.

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Activist InsightCIAM
L'OPE d'Altice sur SFR contestée par des actionnaires minoritaires

Les Echos
by Fabienne Schmitt

Ils dénoncent l’incohérence et les partis-pris, selon eux, du cabinet Accuracy chargé d’évaluerl’équité des termes de la transaction.
Présentée il y a une semaine, l'offre publique d'échange simplifiée d'Altice sur les minoritaires de SFR (22,5% du capital), fait des mécontents. Plusieurs minoritaires de l'opérateur mobile s'estiment lésés. Parmi eux, Charity & Investment Merger Arbitrage (CIMA), qui vient d'envoyer un courrier à l'Autorité des marchés financiers (AMF). Le fonds d'investissement est notamment connu pour avoir attaqué avec succès (l'ADAM avait suivi) l'OPA sur le Club Med en 2013. CIMA conteste l'indépendance des deux membres du conseil d'administration de SFR qui ont supervisés l'offre. Tous deux sont « senior advisor » de, respectivement, Bank of America Merill Lynch et Rothschild & Cie Banque, deux banques qui ont été en affaires avec Altice, pointe le fonds. Il s'insurge par ailleurs contre, selon lui, les « partis-pris » du cabinet Accuracy, mandaté pour évaluer l'équité des termes de la transaction. Dans son courrier à l'AMF dont « Les Échos » ont eu connaissance, il s'étonne notamment qu'il « ait choisi de ne prendre en compte l'historique de cotation de SFR que depuis le 1er avril 2016, alors que cette date correspond à une très forte chute de l'action SFR, causée par des annonces d'Altice ».
Une prime jugée très favorable à Altice.

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Les EchosCIAM
Le fonds CIMA poursuit Disney

Luxemburger Wort
Par Yves Kengen

Pour de nombreux épargnants, investir dans Euro Disney semblait un bon placement. Disneyland Paris est la première attraction d’Europe mais ce succès ne s’est pas retrouvé en Bourse. L’action Euro Disney SCA a perdu 99% de sa valeur depuis 1990 alors que l’actionnaire majoritaire Walt Disney Co engrangeait, grâce au parc parisien, plusieurs milliards d’euros de revenus en 25 ans. Une pilule dure à avaler pour les petits actionnaires.

Devant ce constat, la société de gestion luxembourgeoise Charity Investment Asset Management (Ciam), qui gère le fonds Cima, lui-même actionnaire d’Euro Disney, a décidé de saisir la justice française. Malgré sa fréquentation importante, le parc ne fait pas de bénéfices. Walt Disney est la seule partie qui tire de l'argent d'Euro Disney, grâce notamment à des prélèvements annuels importants sur le résultat.

Critique sur commissions annuelles de plus de 110 millions d'euros

Comment en est-on arrivé là? Au pic de sa valeur, la capitalisation boursière d'Euro Disney était de 3,3 milliards d’euros. Après avoir mis le parc à genoux en prélevant de lourdes commissions, Walt Disney a décidé, en 2015, de recapitaliser Euro Disney à son profit. Cette recapitalisation s’est déroulée en trois étapes: une augmentation de capital, une conversion des dettes en actif et, une OPA.

Le tout calculé au prix de 1,25 euro par action, validé par une attestation d'équité du cabinet Ledouble. A l’issue de l’opération, Walt Disney Co détient 76,7%, le prince saoudien Al-Waleed Bin Talal 10% et le reste, soit 13,3%, est détenu par des fonds d’investissement, dont Cima, et des petits porteurs.

Parallèlement aux actions en justice concernant l'offre, ces actionnaires s'insurgent contre le fait que, dans le cadre de sa gestion du parc, Disney a absorbé environ deux milliards d’euros au nez et à la barbe des autres actionnaires, en prélevant environ 110 à 125 millions d’euros par an, notamment en contrats de développement et de management. Cima affirme que Euro Disney est géré dans l’intérêt exclusif de The Walt Disney Company (TWDC). Au surplus, la direction d'Euro Disney serait dans une situation de conflit d'intérêts en étant incitée à favoriser TWDC au détriment d'Euro Disney. A titre d’exemple, tous les salariés d'Euro Disney se voient accorder des actions d'Euro Disney SCA dévaluées tandis que le comité de direction reçoit des actions de Walt Disney Co…

Tromperie sur la valeur réelle de la société?

Ciam soutient par ailleurs que les actionnaires minoritaires ont été trompés sur la valeur réelle d’Euro Disney à l’occasion de sa recapitalisation. Le point clé concerne la valorisation du foncier. En effet, seule une partie du domaine d’Euro Disney est exploitée. Les parcelles vierges sont progressivement aménagées et vendues. Les plus-values potentielles sont donc énormes. Pour y voir clair, Ciam a commandé un rapport à un expert, Thierry Bergeras, dont les conclusions contredisent celles de l’expert de Disney. En prenant en compte ces plus-values latentes, il évalue l’action d’Euro Disney à 3,7 euros, soit le triple du chiffre pris en compte pour lancer l’OPA.

Cima réclame en outre que soient reversés à Euro Disney 930 millions d’euros au titre des sommes trop perçues par TWDC. Trois procédures sont en cours: une plainte au pénal contre Disney et ses filiales pour abus de biens sociaux, dépôt de documents comptables falsifiés et diffusion d’informations erronées; un procès devant le tribunal de commerce de Meaux pour obtenir le remboursement à Euro Disney par TWDC de 930 millions d'euros; un recours devant la Cour de cassation française contre l'approbation par l'autorité des marchés financiers française de l'offre d'achat des actions Euro Disney déposée par Walt Disney.

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Luxemburger WortCIAM
Germany is too clubby

Portfolio manager magazin
by Mark Böschen

ACTIVIST Hedge fund co-founder Anne-Sophie d’Andlau tangled with Disney and China´s Fosun. Now she wants to take German companies to task.

Ms. D’Andlau, is it true that British investor Chris Hohn is a major role model for you?

We donate 25 per cent of our management fees to charitable organisations for kids. My co-founder Catherine Berjal and I say quite openly that it was Chris Hohn, with The Childrens’ Investment Fund (TCI), who inspired us to do this.

Then it must also inspire you that Deutsche Börse is once again attempting a merger with the London Stock Exchange (LSE), which Hohn helped to block the last time. Will you be actively involved this time as a deal breaker? 

We’re taking a very close look at it. We like this deal better than the one ten years ago. But at the present time, there remains a disparity between the price being offered by Deutsche Börse for the LSE and the price expected by the market. We therefore believe that U.S. rival ICE or another exchange operator could potentially put in a bid for the LSE.

It sounds like a good deal for LSE shareholders that could be even better. What exactly is the incentive for activists like you? 

At the current offering price, both sides profit. But if ICE comes with a counteroffer – and the market is expecting a premium of 12 to 13 per cent – and Deutsche Börse in turn raises its offer by 15 per cent, that would, in our view, be already too much.

Then you would fight against the deal? 

We would need to see.

You are already battling for Disney to pay its minority interest holders more than the EUR 1.25 per share which it has offered for separately exchange-listed Euro Disney, and you have filed suit in several courts. What are the prospects for this?   

They’ve really tried to pull a fast one on Euro Disney minority shareholders. A property appraiser commissioned by us has put a value of EUR 2.40 per share on its real estate holdings alone. Furthermore, inflated licensing fees have been used to systematically drain capital from Euro Disney. We are now demanding part of this back. In total, we put the value per share at EUR 3.70.  

Disney’s appraisals put the fair value at EUR 1.25. 

We have strong arguments on our side. That’s why we’re supported by Guy Wiser-Pratte...

...the U.S. activist, who some years back took a stake in German robot producer Kuka and in the case of Rheinmetall...

... as well as fund group Financiere de l’Echiquier, with around EUR 8 billion in assets under management, and a large investor from London. All of us share in the legal costs, but we are the only ones who are out in front.

Is a lawsuit enough when one is demanding that the offer be tripled? 

That’s why we have been overall in the media, even in the Wall Street Journal. Nice Micky Mouse could soon be seen as evil Micky Mouse – and we don’t think that Disney wants to see that happen. The corporation has done things in France that it would never dare to do back at home, as if France were some kind of banana republic. 

This is the way that some U.S. hedge funds also see Germany since the time that they 

lost billions betting on Volkswagen’s takeover by Porsche, yet neither supervisory authorities nor courts found any irregularities.

The perception which hedge fund managers have of Germany is similar to that of France: Both countries are moving in the wrong direction. It’s for this reason that the major investment funds and pension funds recognise that they need a countervailing power if they want to achieve their return objectives. A counterweight to the well organised way in which the establishment has been doing business for many years. Don’t understand me wrong, we’re happy to have dinner with these guys. But business is business, and we have to defend our investors.

Even in Germany? 

We haven’t yet opened discussions with any German companies. But we want to. That’s why we’re here and why we’re talking with you. We see many similarities between the German and French markets: Both are “clubby”, where the establishment is very powerful and where they like to cut deals among themselves, sometimes to the detriment of minority shareholders. 

If it’s really so bad, perhaps you’d do better to keep a safe distance from Germany. 

We’re interested in Germany because we have faith in the courts. As our next step, we will be meeting with other asset managers. The success of Europe’s shareholder activists will depend upon whether they are able to win the major investors over to their side. Our goal is to gather the Fidelitys of the world around us, the big international investors who own two third of the DAX. Then we will be on the front lines fighting for them.

Two major fund providers in Germany, Union Investment and Allianz Global Investors, have built their own teams to speak with supervisory boards and to voice criticism at general shareholder meetings. Do they need you at all? 

General shareholder meetings are a good forum for us to keep up the pressure. They are a way for us to ensure that management knows that we are here and that we’re not going away. The more funds that think like we do, the better.

Do you always have direct discussions with the company’s executive board beforehand?

Sometimes we know in advance that this will be useless. In that case, we skip over this step. Normally, the first step that all of us take is to speak with management and to listen to what they have to say. In the case of an official takeover offer, however, this costs valuable time.

Aside from Euro Disney, where else are you currently invested?

At French aerospace supplier Zodiac, for example. After eight profit warnings, this company has finally realised that it would do better to sell itself to a larger company. Aviation has been growing so robustly that Zodiac has been unable to fill customer orders quickly enough, so the company needs a parent with sufficiently deep pockets. A larger supplier would likewise be better from the standpoint of Boeing and Airbus. Over the past year, shares of Zodiac have plummeted by one half. It’s a great opportunity for an acquirer.

Your colleagues at Cevian want to split up ABB. Is this a good idea?

Yes! Normally, Cevian works behind the scenes. They’ve been very patient. Now they’re publicly taking a harder line. 

Should the example of ABB also be giving Siemens boss Josef Kaeser pause for thought?

Absolutely. But we currently have our sights more on smaller companies. The ideal size for us is between EUR 1 billion and EUR 5 billion in market value. 

On average, hedge funds with their event-driven investment approaches lost five per cent in 2015 – and star funds Greenlight Capital managed by David Einhorn and Pershing Square managed by Bill Ackman even more than 20 per cent. How was the year for you? 

We ended the year with a gain of 10 per cent, following 15 per cent in the prior year. This has been helping us to gather new capital.

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Les 50 qui ont fait l'actualité en 2015

Option Finance

CIAM – Catherine Berjal et Anne-Sophie d’Andlau contestent l’offre publique sur Euro Disney

Alors qu’elles s’étaient déjà fait connaître en 2013 en contestant l’offre de reprise du Club Méditerranée par Fosun, les deux dirigeantes de la société de gestion CIAM, Catherine Berjal et Anne-Sophie d’Andlau, sont revenues devant les tribunaux en 2015. Cette fois-ci, c’est à The Walt Disney Company (TWDC) qu’elles se sont attaquées. Dans le cadre de la restructuration de sa filiale Euro Disney, la maison mère a converti ses créances auprès de cette dernière en capital, ce qui a fait augmenter sa participation, et l’a obligée à procéder à une offre publique sur le reste des titres. Le prix proposé, 1,25 euro par action, a toutefois été jugé très insuffisant par CIAM, qui estimait que la société devait être valorisée 3,70 euros par action. Après avoir engagé une procédure au pénal, les deux gérantes ont contesté la validité de la décision de conformité de l’offre délivrée par l’AMF dès le mois d’avril. Déboutées par la cour d’appel, elles ont formé un pourvoi en cassation en octobre, et engagé en parallèle une action au civil.

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Option FinanceCIAM