New leadership, new acquisition target, same old response from hedge funds: Such is the unfortunate position of Deutsche Börse, which earned the ire and enmity of some of its largest shareholders, including the largest, U.S. hedge fund Atticus Capital, with a US$2.8 billion bid for the International Securities Exchange.
Atticus—which owns nearly 12% of the German stock exchange operator—sent a letter last week to Deutsche Börse leaders saying it was “furious” with the decision to buy the ISE, arguing that the acquisition has “negligible strategic rationale and will result in severe value destruction.”
Even worse, according to Atticus and several other big stakeholders, was that the owner of the Frankfurt Stock Exchange didn’t even bother to consult them before striking the deal, the Financial Times reports.
In the letter, Atticus CEO Timothy Barakett and Vice President David Slager wrote that they were “especially concerned about management’s and the supervisory board’s emerging pattern of ignoring shareholder concerns and input.” They threatened to replace shareholder-elected board members if Deutsche Börse should make another big deal without seeking shareholder approval. Other large shareholders have voted against a proposal giving Deutsche Börse management a freer hand in pursuing acquisitions.
Deutsche Börse defended the ISE acquisition, noting it had unanimous support among board members. But CEO Reto Francioni and Chairman Kurt Viemetz are not likely to forget the fate of their predecessors, Werner Seifert and Rolf Breuer, who were forced out—in a campaign orchestrated by hedge fund The Children’s Investment Fund—after a botched bid for the London Stock Exchange.