ValueAct, Independent Franchise Partners Push For Breakup Of MSCI

Jan 9 2015 | 12:39pm ET

Large shareholders are pushing for a breakup of MSCI, and activist hedge fund ValueAct is leading the charge.

ValueAct, which recently boosted its position in MSCI to 8.3%, is urging the index company to split off and sell its stock market index business at a time when similar companies are selling at lofty values.

But resistance was expected on MSCI’s part.

The Financial Times reports that an ongoing rift between MSCI and ValueAct has extended much further than a debate over whether the hedge fund should be given a board seat, a demand the shareholder made in August. After MSCI rejected ValueAct’s seat bid over the fund’s spin-off stance, several leading shareholders began to press for MSCI’s breakup and support their co-shareholders.

That list includes Independent Franchise Partners (which owns an 8.58% share in MSCI according to Morningstar) and a third large investor, which the FT did not identify but did state its members supported ValueAct’s push for a board seat.

‘ValueAct has a good track record of being a constructive board member,’ the shareholder told the London-based newspaper. ‘At MSCI, there are questions on whether a long-standing management is wedded to a strategy that doesn’t make sense, and ValueAct is very thoughtful about the questions it asks.’

ValueAct’s position on MSCI’s breakup may make financial sense given a number of recent deals that have seen Index providers sell for lofty prices. This week, NASDAQ purchased U.S. index provider Dorsey Wright & Associates for $225 million. In 2013, the Russell indexes fetched $2.7 billion from the London Stock Exchange.

ValueAct could not be reached for comment.

The FT report came a day before news broke that a law firm in New York is investigating MSCI for possible breaches of “fiduciary duty” by the company’s board of directors. Levi & Korsinsky announced the launch of the investigation on Thursday, although it is unclear at this time whether the investigation is related to shareholders’ spinoff demands.

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