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30 November 2018 | 13:52 UTC
Albert Bridge Capital has not engaged in activism per se in the case of the UK technology company Micro Focus [LON:MCRO], but its approach does “in some cases border on suggestivism”, according to the London-based fund’s CIO and Managing Director Drew Dickson.
The fund has previously taken a “suggestivist” approach in the case of Volkswagen [ETR:VOW], Dickson told Activistmonitor on the sidelines of the Sohn conference in London yesterday.
Albert Bridge’s approach is about making suggestions rather than demands, with suggestions typically limited to “intelligent things to do from a value creation perspective,” he said.
“We really just try to understand what their [companies] goals are and try to see if they’re aligned with ours,” said Dickson, who is the firm’s founder and a former partner at Perella Weinberg Partners’ asset management division. He has also managed investments at Fidelity and Och-Ziff.
Referring to the suggestions the fund might make to companies, Dickson said: “It [suggestivism] is not a key focus for us but in some instances it does make sense to at least share our thoughts with management,” he said. His firm typically seeks investments with “idiosyncratic volatility with asymmetric payoffs” based on investor biases, according to its website.
Dickson used his presentation at the Sohn conference to promote Micro Focus as a long investment, after the stock fell sharply following the poor integration of its most recent acquisition - the USD 8.8bn cash and stock acquisition of part of software business Hewlett Packard Enterprise [NYSE:HPE]. He did not disclose Albert Bridge’s stake but said it is one of the largest in his portfolio.
Micro Focus’s stock is still down 40% year-to-date but is recovering, and Albert Bridge believes there is still another 50 to 100 pence per share upside left in the stock, Dickson said.
After the company issued profit warnings in January and March, a 12 April media report said activist investor Elliott Management had bought the stock and was pushing the company to sell to a private equity firm. Elliott disclosed a 5.1% stake on 23 April, and said its holding went below 5% on 5 October.
“The stock was at GBP 9 at the time (that) Elliott got involved, and they spoke to the company as well… if the stock had stayed down at 7 or 8 or 9 pounds per share then perhaps (it might have been sold), but as it started moving back up I think a lot of the easy juice came out of the story.”
The company is “not as clear an activist story as it would’ve been”, he said.
In July, it was announced that Micro Focus would sell its SUSE Linux business to EQT for USD 2.5bn.
SUSE was the only Micro Focus asset actually growing, so it was a “nice-to-have” but was also a departure from the company’s traditional model, Dickson noted.
“Kevin (Loosemore), the chairman, his approach is that if someone wants to offer me more than I think it’s worth then I will sell it, and I think he got that with SUSE.”
Similarly, Dickson believes the chairman is not expecting buyer approaches for his other maintenance revenue businesses. “He’ll manage it himself and he’ll make it worth more than anyone’s willing to pay for it, which is why he got the asset so cheaply in the first place,” said Dickson.
by William Mace in London
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