Xavier Niel, the French telecoms billionaire, has teamed up with a widely known actual property investor to purchase a 4.1 per cent stake in Europe’s largest purchasing centre operator, Unibail-Rodamco, with the goal of scuppering its forthcoming €3.5bn rights difficulty.
Mr Niel and Aermont Capital’s founder Leon Bressler, who led Unibail himself for 14 years till 2006, despatched a four-page letter to the board on Thursday laying out a broad critique of the corporate’s technique and calling for adjustments. They declared they’d vote towards the “severely dilutive” and “pointless” rights difficulty and urged others to do the identical.
The pair argued that Unibail-Rodamco ought to as a substitute promote its US property portfolio to pay down its €24bn debt load incurred within the 2018 acquisition of Australian mall operator Westfield. They’re additionally in search of three board seats.
The shock marketing campaign throws doubt over the shareholder vote on the rights difficulty on November 10. Unibail-Rodamco must win over two-thirds of shareholders to maneuver forward with the share sale.
It’s a key a part of the €9bn debt discount plan introduced in September, which the company cast as wanted to keep away from a rankings downgrade and address the fallout from the Covid-19 pandemic.
In an interview, Mr Niel mentioned Unibail-Rodamco’s present administration and board of administrators had been “performing out of worry” and had been “prisoners of a failed technique” that started with the Westfield acquisition.
“We can not let this firm, which is a European champion, self-destruct,” mentioned Mr Niel, who earned his fortune by creating French telecoms group Iliad.
“The governance of the corporate doesn’t operate correctly since not one of the administrators personal important stakes. We wish to be a reference shareholder that may assist it rebuild to generate extra worth.”
Unibail’s woes spotlight the broader challenges for homeowners of business property, and notably landlords of malls, whose rental revenue has plummeted because of coronavirus.
As Europe grapples with a resurgence of infections and the spectre of latest restrictions on enterprise and social life, retailers are struggling to remain afloat, with some in search of to renegotiate cheaper leases. The pandemic has additionally accelerated the shift to ecommerce, which some buyers consider will weaken business property firms over time.
Unibail-Rodamco has been probably the most shorted shares in Europe for the reason that summer time. Practically 30 per cent of the shares in free float are out on mortgage to buyers betting towards the corporate, in accordance with IHS Markit information on Bloomberg.
Mr Bressler mentioned that Unibail-Rodamco would be capable to climate the downturn triggered by the pandemic due to its robust portfolio of high-end malls in Europe. They embrace Westfield London, the Carrousel du Louvre in Paris and La Maquinista in Barcelona.
“In a post-Covid world, the most effective malls in engaging places would be the large winners,” he mentioned. “It’s time to re-establish Unibail once more as a pure participant targeted on Europe and to finish its ill-fated journey within the US the place it doesn’t have the crucial mass to succeed.”
Aermont’s funds have owned a 2 per cent stake in Unibail since roughly mid-2019. Mr Niel has been a longtime investor in Mr Bressler’s funds however solely started constructing a direct stake in Unibail-Rodamco not too long ago by way of his private holding firm, NJJ Capital.
Though Mr Niel and Mr Bressler rejected the time period, they’re performing a lot as activist buyers do after they purchase shares in an organization and agitate for adjustments. They mentioned they reserved the appropriate to purchase extra shares in Unibail-Rodamco however wouldn’t search to realize management.
“We aren’t activists however can’t stay passive any longer,” mentioned Mr Bressler.