TCI's 5.8% slice of Royal Mail shares fuels criticism of Vince Cable over 'fire sale' as Labour says small investors let down
A hedge fund known for its aggressive investment strategy has become the largest private shareholder in Royal Mail, re-igniting anger overVince Cable's controversial privatisation of the postal service.
The Children's Investment Fund owns a 5.8% stake in the 500-year-old postal service, making it the largest shareholder behind the government, which has a 38% stake. TCI is controlled by publicity-shy Chris Hohn, who pressed for the sale of ABN Amro, which ended in the Dutch bank's disastrous takeover by the Royal Bank of Scotland, and has been dubbed a "locust" in Germany for its investment style.
TCI's stake in Royal Mail came to light under stock market rules obliging investors to report holdings greater than 5%, and was seized on by government critics who argue that the business secretary failed small investors by selling the shares off to "big money" in the City and failing to live up to his promise to sell them to long-term investors.
TCI revealed that it owns 58.1m shares, on a day when the shares rose to 499p, slightly down on last week but still 50% higher than the 330p the shares were sold at.
Hohn, the Surrey-born chief executive of TCI, is also among the UK's most generous philanthropists and first came to prominence in 2005 after he ousted the chief executive of Deutsche Börse, Werner Seifert, ending his bid to take over the London Stock Exchange. Seifert retaliated by branding TCI partners and its US equivalents "locusts".
The bulk of the controversial hedge fund's stake in Royal Mail is likely to have been bought on the stock market rather than directly from the government, but it may still raise hackles among trade unionists who recently voted for a nationwide 24-hour strike next month. It has also reignited criticism from Labour that Royal Mail was sold on the cheap.
Ian Murray, the shadow minister for trade and investment, argued that small investors had been failed by the government's "fire sale".
"We have seen small investors losing out while the vast majority of shares sold have gone to big-money investors in the City," he said. "Vince Cable claimed that the sale would prioritise long-term investors but serious questions will be asked on whether this is the case, not least given the huge volume of trades in Royal Mail shares which we have seen in the first days of trading, running into hundreds of millions."
He added: "This is on top of real concerns that taxpayers have been left short-changed to the tune of hundreds of millions of pounds at a time when families across Britain are facing a cost of living crisis."
Cable told a committee of MPs earlier this month the government was in "a position to ensure that we do get the right kind of investor community". He said: "We are talking about pension funds and insurance companies that hold the savings of millions of people, and we have been very clear that that is the kind of relationship we want to have, that is long-termism."
A spokesman at the business department referred to these comments and said the government was not disappointed with a hedge fund owner, adding: "It is not a matter for us, it is a matter for the company."
TCI and Royal Mail declined to comment.
Hedge funds have been among the city institutions and retail investors scrambling for a slice of Royal Mail, in part because they believe modernisation of the postal service could happen faster than planned.
David Buik, a market commentator at Panmure Gordon, described Hohn as an extremely shrewd businessman. "My guess is that he thinks it is a probably a very good company. I suspect he thinks it is undervalued – I suspect he has bought his stake in it for that reason." Neither will it have escaped his attention that Royal Mail is a plum takeover target, Buik added.
"If things don't work out on an independent basis, it would look very cosy in the portfolio of UPS or Deutsche Post."
TCI has grown into one of the world's largest hedge funds since its creation in 2003, and currently has $11bn in assets under management.
In recent months it has been buying into companies with corporate governance concerns, such as Japan Tobacco and Rupert Murdoch's News Corp in the wake of the phone hacking scandal. Since News Corp was split, TCI now owns a stake in Twentieth Century Fox.
Article Source : http://www.guardian.co.uk
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