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Lonely activist investor pushes ‘very un-European’ limits

Monday, 9 Sep 2013 | 2:50 AM ET
Carl Icahn
Scott Eelis | Bloomberg | Getty Images
Carl Icahn

Alexander Proschofsky is happy to be one of a kind but would sometimes welcome company from others prepared to campaign against underperforming corporate executives in Austria.

The 43-year-old founder of Cube Invest, best known for his leadership of a 2007-08 shareholder revolt against Julius Meinl over the management of his namesake bank, is a rare example of an activist investor in a culture where consensus is the norm.

"It's very un-Austrian and very un-European," Proschofsky, dressed in T-shirt, shorts and flip-flops, told Reuters in an interview at his minimalist penthouse office overlooking Vienna's St Stephen's Cathedral.

"I am a unique case - still. But competition enlivens business and I'd have nothing against it if there were others," said Proschofsky, dubbed the "stock exchange rebel" in Austria, partly due to the blond dreadlocks he sported until adopting a shorter style with bleached tips last year.

(Read more: Activist investors return)

Aggressive shareholder activism has had mixed results in Europe, where protracted fights have on occasion driven down share prices and put off other shareholders, instead of bringing about the changes the activists demand.

Still, bankers such as Francois-Xavier de Mallmann, head of investment banking services in Europe, Africa and the Middle East at Goldman Sachs, detect changes ahead.

"We are expecting an increase in the number of activist situations in Europe," de Mallman told Reuters, saying more and more corporate clients were seeking advice on ways to defend themselves against activist investors.

(Read more: Welcome to the golden age of activist investors)

Figures from London-based research group Activist Insight highlight the difference in cultures between continental Europe and north America.

While there have been 357 recorded activist campaigns in the United States so far this year, including Carl Icahn's high-profile actions at Dell and Apple, there have been just 26 at European companies.

Run of successes

Albert Birkner, partner at Vienna corporate law firm CHSH and co-author of a study on Austrian corporate governance, said the idea of shareholders in control was still unusual in a country where many deals are done on the basis of friendships.

"There is a need in Austria to remedy a certain deficiency in understanding compliance and anti-corruption rules," he said. "Unlike Germany, where minority shareholders traditionally exercise a certain influence in shareholders' meetings, Austria - to date - is much less affected in that respect."

Proschofsky has had a run of successes over the years and says his most recent involved helping to remove the head of the administrative board of property firm Conwert from its day-to-day business.

(Read more: Activist investors could light up summer market)

The investor had accused Johannes Meran of favoring friends and family in deals at the expense of shareholders and presiding over large writedowns, losses and the scrapping of the dividend this year.

Meran has denied the accusations and has said Proschofsky played no role in his decision to step back from running the company.

"If Mr Proschofsky feels he has been proved right, then good luck to him," Meran told Reuters.

Proschofsky aims to oust Meran altogether and believes Conwert shares still have the potential to gain another 50 percent to reach their true value. The rise in the share price so far has been a modest 6 percent, since Meran said on July 24 he would step down.

(Read more: Carl Icahn says he's taken a position in Apple, says stocks undervalued)

As in previous cases - which have included actions at Constantia Industries, Generali and Bank Austria - Proschofsky brought together an ad hoc group of investors at Conwert.

In the Meinl case - in which shareholders in Meinl Bank affiliates succeeded in ousting boards they believed had betrayed their interests - he worked with U.S. hedge fund QVT, Britain's Elliott Advisors, two Austrian investment fund managers, one wealthy private investor and a Russian hedge fund.

Awaiting trial

Julius Meinl V, chairman of Meinl Bank and heir to one of Austria's best-known business dynasties, was arrested on fraud allegations and is still awaiting trial four years later, living in London, after posting 100 million euros ($132 million) bail.

Still, Proschofsky said he had to work hard to form alliances every time. "It's not as though I can just say: I'll call up five hedge funds," said Proschofsky. "I wish I could, but I can't."

Proschofsky has specialised in "squeeze-out" situations, in which he has won better deals for minority shareholders being forced out through acquisitions.

(Read more: When tweets move markets: Icahn and Apple)

He is in the midst of two such battles, involving UniCredit's Bank Austria and Constantia Packaging, after previous victories such as at Generali Holding Vienna, where minorities were being pushed out by parent insurer Generali.

Proschofsky and his allies eventually won an improved offer of 52 euros per share, up from Generali's first offer of 42.50.

Proschofsky, who also owns several Vienna houses that he rents out, declined to give the value of his investment fund or his own personal wealth.

(Read more: Icahn rips apart Dell's push for deal changes in open letter)

One clue to the latter is the 1.5 percent he owned in Conwert - alone worth some $15 million - at the time of the group's annual shareholders' meeting in May, though he did not disclose his current stake.

He says other real-estate groups also offer chances for activism, given their relatively high "free float" of readily tradeable shares, whereas many Austrian companies have major shareholders - in some cases, the government - who effectively control strategy.

"There's really no other target currently, although there's always some really badly managed companies around, not only in real estate," he said.

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