Shareholder Activism Takes Center Stage in UK: David Montgomery's Departure Marks a Turning Point

Strategic Insights -

As the spat between Mirror Group's shareholders and its former chief executive David Montgomery comes to a close, the dust is still settling on the significant implications of this high-profile corporate shake-up. Several investors, including Phillips & Drew Fund Management and Hermes UK Focus Fund, had been pushing for change at the top of Mirror Group, citing poor strategic decisions and underperformance. This deliberate strategy, amplified by Hermes UK Focus Fund's building of a significant stake in the company, has ultimately led to the departure of Mr. Montgomery, chief executive since 1992.

Key Takeaways:

  • The Hermes UK Focus Fund, an activist fund owned by Hermes, had built up a stake of just under 4.1% in Mirror Group, making it one of the largest shareholders in the company.
  • The fund, led by Peter Butler, had identified Mirror Group as an underperforming company that could benefit from change in management and strategy, citing poor strategic decisions such as investing in the Independent newspaper and establishing its Live TV subsidiary.
  • The Hermes UK Focus Fund had planned to start talking to Mirror's board this month before being jolted into action by the breakdown of talks with Trinity, in which one of its messages was that the board was in disarray and likely to receive a low opportunistic bid.
  • The fund's meetings with Mirror executives and Mr. Montgomery ultimately led to his departure, making way for new chief executive John Allwood.
  • This event marks a turning point for UK investment management, as shareholder activism - even aggression - has become more prevalent, with similar events potentially occurring at other companies owned by Hermes UK Focus Fund.

Statistics:

  • Hermes UK Focus Fund holds a 22% stake in Mirror Group.
  • The fund has a 4.1% stake in Mirror Group.
  • Since autumn, the fund has jettisoned stakes of just under 3% in eight companies where it has built up significant holdings.
  • Hermes UK Focus Fund is planning to discuss its views with the boards of the seven other companies it owns significant stakes in.

Sources:

  • "Copyright Financial Times Limited 1999. All Rights Reserved"