Barclays Activist Stands Firm on Investment Bank Criticism

LONDON (Capital Markets in Africa) – The activist investor challenging Barclays Plc’s management responded to last week’s rebuff with an olive branch, saying that “mutual goodwill” could deliver a major increase in value — while repeating his opposition to the lender’s plans for its investment bank.

Edward Bramson, whose Sherborne Investors vehicle holds a 5.5 percent interest in Barclays stock, said in a letter published Monday that “we have consistently assisted boards that were initially reluctant to deliver major increases in value for all of the shareholders in their companies while we were a shareholder and for years thereafter.”

The activist seized on the departure of Tim Throsby, who ran the investment bank until last month, as grounds for changing this department’s strategy.

Bramson’s response follows the London-based bank’s defense of its direction in a letter published last week that called his criticisms “selective and misleading.” Barclays investors will vote on his bid for a board seat at the annual meeting on May 2.

Although he struck a more conciliatory tone, Bramson also criticized the lender’s new chairman, Nigel Higgins. The letter said he has signaled his “complete support” for Barclays’ current direction, as shown by his search for more directors with banking backgrounds.

“By our count, five of the current directors already have banking or advisory backgrounds and we wonder how adding more could possibly make any substantive difference,” Sherborne said.

The activist bought Barclays’s shares last spring and holds his investment through derivatives. He has recently extended the duration of some options to December 2020, according to U.S. filings. In the letter on Monday, the activist said his vehicle “now has almost 1 billion pounds at risk in Barclays.” The bank has said that Bramson’s approach is skewed to short-term benefits, as demonstrated by the way his holding is structured.

Greater Risk
Shareholder advisory firm Glass Lewis & Co. has meanwhile recommended against Bramson’s nomination to the board. His proposal both lacks “a comprehensive alternative strategy” and would entail “considerably greater risk and uncertainty,” according to the firm’s analysis.

A Barclays spokesman wasn’t immediately available to comment.

In a letter on April 8, Bramson said the British bank could be forced to raise capital, sell lucrative businesses or cut dividends if it persists in prioritizing its investment bank.

Edward Firth, analyst at Keefe Bruyette & Woods Inc., said the board should consider bringing in Bramson. “It is madness to keep doing the same thing again and again, imagining that the outcome will be any different,” he said in a note to clients. “We struggle to see how an additional non-executive with a large shareholding and the resources to provide comprehensive review would be anything other than net positive.”

Source: Bloomberg Business News