FRANKFURT (Reuters) – U.S. activist investor Elliott has urged German classifieds group Scout24 (G24n.DE) to sell its car listings business and ramp up a share buyback program to boost returns to investors.
The headquarters of Scout24, an operator of digital marketplaces for real estate and automobiles, is pictured in Munich, Germany July 5, 2019. REUTERS/Michael Dalder
Elliott, which owns more than 7% of Scout24, accused the German company’s Chief Executive, Tobias Hartmann, of showing a lack of ambition and urged his management team to take immediate remedial action.
“Should you take the decisive action needed to remove the impediments holding back Scout24, we believe the share price could rise to in excess of 65 euros per share,” Elliott said in a July 26 letter that was made public on Monday.
“Unfortunately, recent events have us wondering if the Scout management team shares our optimism for these high-quality businesses.”
A Scout24 representative was unavailable for immediate comment.
A source familiar with the matter said Elliott believed that autos arm AutoScout24 could fetch a sale price of up to 2.5 billion euros ($2.8 billion) and that the group’s core property operation had a standalone value of 5 billion euros.
Scout24’s shares ended last week at 50.25 euros, valuing the entire business at 5.4 billion euros.
Elliott, the $34 billion fund founded by Paul Singer, has shaken up corporate Germany with restructuring bets on companies ranging from business software group SAP (SAPG.DE) to industrial conglomerate Thyssenkrupp (TKAG.DE).
In targeting Scout24, where it is one of the largest shareholders, Elliott is focusing on a company that was left facing uncertainty after a takeover bid by Blackstone (BX.N) and Hellman & Friedman collapsed this year.
The public tender offer by the two private equity houses at 46 euros a share failed to win the support of a majority of shareholders in spite of the company’s management recommending acceptance.
In its letter, Elliott accused Hartmann of “a lack of ambition that, for a listed company of Scout24’s quality and prospects, is extremely worrying”.
It said that a 300 million euro share buyback program announced by Scout24 was insufficient and that the company could support a far larger return of capital to investors with the use of higher debt.
Elliott also said that two strategic investors and several sponsors had shown interest in AutoScout24, without naming them.
The source familiar with Elliott’s thinking said that German publisher Axel Springer (SPRGn.DE) and used car platform AUTO1 Group, which is backed by Japan’s Softbank (9984.T), have shown interest in AutoScout24.
Springer declined to comment and an AUTO1 representative was not immediately available for comment.
($1 = 0.8988 euros)
Writing by Douglas Busvine; Editing by David Goodman