Activist investment firm Sherborne Investors has taken a 5pc stake in Barclays Bank (LSE:BARC), making it the British financial institution’s fourth-largest shareholder. Sherborne, which is headed up by well-known corporate raider Edward Bramson, and its affiliated companies have bought 5.16pc of Barclays’ issued share capital through a combination of shares and derivatives costing around £580m.
It is not yet clear what Bramson’s plans for Barclays are, but the Sherborne said its turnaround assumptions for the bank indicate a potential return on investment ‘in line with its customary return objectives’.
For its part, Barclays said: ‘As with all its shareholders, Barclays will continue to engage with Sherborne, and welcomes them as a shareholder.’ The market reacted favourably to Sherborne’s involvement, with Barclays’ shares rising 4.7pc, or 9.8p, to 219.3p at the time of writing, making it the second-biggest riser on the FTSE 100.
The positive reaction is likely down to Bramson’s track record for increasing the value of UK companies by shaking up their management, returning cash to shareholders and stripping assets. Perhaps the best example is Electra Private Equity, where Bramson slashed costs and sold off a series of assets after taking control, raising some £1.35bn for shareholders.
He has also staged coups at UK businesses like F&C Asset Management, telecoms business Spirent Communication, and chemicals firm Elementis. However, some have pointed to Bramson’s more recent investment in buyout group 3i, where he took a very passive role. In this scenario, his interest in Barclays’ could be interpreted as a vote of confidence.
Barclays’ investors are likely hungry for a turnaround following a difficult period for the bank. Last month, it reported a £1.9bn loss for 2017 and last year saw chief executive Jes Staley hit the headlines after controversially attempting to unmask a whistleblower, a move which flew in the face of company policy.
There were hints at an improvement in last month’s results, however, with Staley claiming the bank was ‘done’ restructuring. He said it would return its dividend to the previous level and considers share buy-backs for the first time in two decades.
Staley has already made considerable efforts towards re-shaping the bank, exiting 20 countries including the whole of Africa. The bank is also due to settle with the Department of Justice over its role in selling risky mortgages, something that has been a millstone around its neck for some time now.
However, all eyes will now likely be on whether Bramson intends to drive the separation of Barclays’ profitable retail bank and its struggling investment bank, an issue that has been troubling investors for some time now. Earlier this month, we took a look at the importance of shareholder activism on AIM using the example of Management Resource Solutions.
Author: Daniel Flynn
Disclosure: The author of this piece does not own shares in the company mentioned