Xavier Niel, the French telecoms billionaire, has teamed up with a widely known actual property investor to purchase a 4.1 per cent stake in Europe’s greatest purchasing centre operator, Unibail-Rodamco, with the goal of scuppering its forthcoming €3.5bn rights concern.
Mr Niel and Aermont Capital’s founder Leon Bressler, who led Unibail himself for 14 years till 2006, despatched a four-page letter to the board on Thursday laying out a broad critique of the corporate’s technique and calling for adjustments. They declared they might vote in opposition to the “severely dilutive” and “pointless” rights concern and urged others to do the identical.
The pair argued that Unibail-Rodamco ought to as an alternative promote its US property portfolio to pay down its €24bn debt load incurred within the 2018 acquisition of Australian mall operator Westfield. They’re additionally looking for three board seats.
The shock marketing campaign throws doubt over the shareholder vote on the rights concern on November 10. Unibail-Rodamco must win over two-thirds of shareholders to maneuver forward with the share sale.
It’s a key a part of the €9bn debt discount plan introduced in September, which the corporate forged as wanted to keep away from a rankings downgrade and deal with the fallout from the Covid-19 pandemic.
In an interview, Mr Niel stated Unibail-Rodamco’s present administration and board of administrators had been “performing out of worry” and had been “prisoners of a failed technique” that started with the Westfield acquisition.
“We can’t let this firm, which is a European champion, self-destruct,” stated Mr Niel, who earned his fortune by creating French telecoms group Iliad.
“The governance of the corporate doesn’t operate correctly since not one of the administrators personal important stakes. We wish to be a reference shareholder that may assist it rebuild to generate extra worth.”
Unibail’s woes spotlight the broader challenges for house owners of business property, and notably landlords of malls, whose rental revenue has plummeted because of coronavirus.
As Europe grapples with a resurgence of infections and the spectre of recent restrictions on enterprise and social life, retailers are struggling to remain afloat, with some looking for to renegotiate cheaper leases. The pandemic has additionally accelerated the shift to ecommerce, which some buyers imagine will weaken industrial property firms over time.
Unibail-Rodamco has been probably the most shorted shares in Europe because the summer season. Almost 30 per cent of the shares in free float are out on mortgage to buyers betting in opposition to the corporate, based on IHS Markit information on Bloomberg.
Mr Bressler stated that Unibail-Rodamco would have the ability to climate the downturn triggered by the pandemic due to its sturdy portfolio of high-end malls in Europe. They embody Westfield London, the Carrousel du Louvre in Paris and La Maquinista in Barcelona.
“In a post-Covid world, one of the best malls in engaging areas would be the large winners,” he stated. “It’s time to re-establish Unibail once more as a pure participant targeted on Europe and to finish its ill-fated journey within the US the place it doesn’t have the essential mass to succeed.”
Aermont’s funds have owned a 2 per cent stake in Unibail since roughly mid-2019. Mr Niel has been a longtime investor in Mr Bressler’s funds however solely started constructing a direct stake in Unibail-Rodamco not too long ago through his private holding firm, NJJ Capital.
Though Mr Niel and Mr Bressler rejected the time period, they’re performing a lot as activist buyers do after they purchase shares in an organization and agitate for adjustments. They stated they reserved the suitable to purchase further shares in Unibail-Rodamco however wouldn’t search to achieve management.
“We’re not activists however can’t stay passive any longer,” stated Mr Bressler.